Group Financial Results for the nine months ended 30 September 2018 Bank of Cyprus Group 26 Nov 2018 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 indicated. A comma is used to separate thousands and a dot is used to separate decimals. Important Notice Regarding Additional Information Contained in the Investor Presentation The presentation for the Group Financial Results for the nine months ended 30 September 2018 contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014. The presentation for the Group Financial Results for the nine months ended 30 September 2018 (the “Presentation”), available on http://www.bankofcyprus.com/en-GB/investor-relations- new/reports-presentations/financial-results/ , includes additional financial information not presented within the Group Financial Results Press Release (the “Press Release”), primarily relating to (i) NPE analysis (movements by segments geography and customer type), (ii) rescheduled loans analysis, (iii) details of historic restructuring activity including REMU activity, (iv) analysis of new lending, (v) Income statement by business line, (vi) UK operations analysis, (vii) NIM and interest income analysis and (viii) Loan portfolio analysis in accordance with the three-stages model for impairment of IFRS 9. Except in relation to any non-IFRS measure, the financial information contained in the Investor Presentation has been prepared in accordance with the Group’s significant accounting policies as described in the Group’s Annual Financial Report 2017, and updated in the Mid-Year Financial Report 2018. The Presentation should be read in conjunction with the information contained in the Press Release and neither the financial information in the Press Release nor in the Presentation constitute statutory financial statements prepared in accordance with International Financial Reporting Standards.
Transcript
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Group Financial Results
for the nine months ended 30 September 2018
Bank of Cyprus Group
26 Nov 2018
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 indicated. A comma is used to separate thousands and a dot is used to separate decimals.
Important Notice Regarding Additional Information Contained in the Investor Presentation
The presentation for the Group Financial Results for the nine months ended 30 September 2018 contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU)
596/2014.
The presentation for the Group Financial Results for the nine months ended 30 September 2018 (the “Presentation”), available on http://www.bankofcyprus.com/en-GB/investor-relations-
new/reports-presentations/financial-results/ , includes additional financial information not presented within the Group Financial Results Press Release (the “Press Release”), primarily relating to (i)
NPE analysis (movements by segments geography and customer type), (ii) rescheduled loans analysis, (iii) details of historic restructuring activity including REMU activity, (iv) analysis of new
lending, (v) Income statement by business line, (vi) UK operations analysis, (vii) NIM and interest income analysis and (viii) Loan portfolio analysis in accordance with the three-stages model for
impairment of IFRS 9. Except in relation to any non-IFRS measure, the financial information contained in the Investor Presentation has been prepared in accordance with the Group’s significant
accounting policies as described in the Group’s Annual Financial Report 2017, and updated in the Mid-Year Financial Report 2018. The Presentation should be read in conjunction with the
information contained in the Press Release and neither the financial information in the Press Release nor in the Presentation constitute statutory financial statements prepared in accordance with
• Total income of €179 mn and positive operating result of €86 mn for 3Q2018
• Profit after tax of €17 mn in 3Q2018
• Cost of risk of 0.7% for 3Q2018 and 1.0% for 9M2018, in line with guidance for COR<1.0% for FY2018
• Cyprus deposits increased by 2% qoq to €16.9 bn
• Significant liquidity surplus of €1.9 bn
• Loan to deposit ratio at 72% and 65% pro forma for Helix
Positive
Performance in
3Q2018
Strong Liquidity
Position
• Fourteen consecutive quarters of material organic NPE reduction
• Gross NPEs reduced by €293 mn (4%) qoq to €7.6 bn; excluding Helix, organic NPE reduction of €224 mn, in line with
guidance
• Helix further reduces Gross NPEs by €2.6 bn to €5.0 bn2
• Gross NPE ratio at 37%2 pro forma for Helix (-10 p.p.2)
• NPE coverage at 49%2 pro forma for Helix
Continued
Progress on
Balance Sheet
Repair
(1) The issuance is conditional upon BOCH completing the reclassification of share premium to distributable reserves, which was approved at BOCH's Annual General Meeting and requires the subsequent
approval by the Irish Court pursuant to section 85(1) of the Companies Act 2014 of Ireland. The consent of the ECB for the Capital Reduction is required before it is approved by the Irish Court
(2) Calculations assume Significant Risk Transfer benefit from Helix, which as at the date of slides has not been approved by the ECB (refer to slide 35). Calculations assume no changes in capital or
provisioning levels required as result of upcoming SREP process or otherwise. Any such changes may be materially adverse
• Agreement signed for sale of gross loans of €2.81 bn, of which €2.71 bn Gross NPEs (contractual balance of c.€5.72,3 bn) in August
• Consideration of c.€1.4 bn, 24 cents on contractual and 48 cents on GBV
• Overall transaction c.50 bps4 capital accretive
• Completion expected by 1Q2019; Awaiting ECB’s approval for “Significant Risk Transfer (SRT)”
• Loss of €150 mn reported in 9M2018 to reduce to c.€105 mn by completion, as time value of money unwinds
• Bank’s participation in Helix senior debt tranche subject to regulatory approval, syndicated down to €350 mn from €450 mn;
syndication process continues
Sale of
UK subsidiary
• Sale of BOC UK completed on 23 November; consideration of c.€120 mn, neutral to profit and loss account
• c.70 bps capital accretive of which 60 bps booked in 3Q2018
• In line with strategy of delivering value to shareholders and repatriating capital to support growth in the Cypriot economy
Q
AT1 issuance • Pricing of €220 mn AT1, expected to be issued before year end5, strengthening Total Capital Ratio by c.140 bps
Corporate Actions in 3Q2018 delivering Value for Shareholders
3
Creating a Stronger, Safer and Cyprus focused Bank
(1) As at 30 September 2018, portfolio includes gross loans of €2,8 bn (of which € 2,6 bn gross NPEs) and properties of €60mn
(2) The difference between the contractual balance and the GBV relates to IFRS adjustments/unrecognised income and non-contractual write-offs
(3) As at 31 March 2018
(4) Calculations assume Significant Risk Transfer benefit from Helix, which as at the date of slides has not been approved by the ECB (refer to slide 35). Calculations assume no changes in capital or
provisioning levels required as result of upcoming SREP process or otherwise. Any such changes may be materially adverse
(5) The issuance is conditional upon BOCH completing the reclassification of share premium to distributable reserves, which was approved at BOCH's Annual General Meeting and requires the subsequent
approval by the Irish Court pursuant to section 85(1) of the Companies Act 2014 of Ireland. The consent of the ECB for the Capital Reduction is required before it is approved by the Irish Court
Existing T2 AT1 issuance Total Capital ratiopro forma for Helixand AT1 issuance
1
9.9
3.6 2.6
15.0
7.6
5.0
Dec2014
Sep2018
Sep2018
pro forma for Helix
Net NPEs (€ bn)
Impact of Corporate actions on Key Metrics
4
€10 bn Gross NPE reduction since peak 26 p.p. reduction in NPE ratio since peak
CET1 ratio at 13.2%1,3 pro forma for Helix
-26 p.p.
Gross NPEs provision coverage
Total Capital ratio at 16.2%1,2,3 pro forma
for Helix and AT1 issuance
34% 52% 49%
(1) Calculations assume Significant Risk Transfer benefit from Helix, which as at the date of slides has not been approved by the ECB (refer to slide 35). Calculations assume no changes in capital or
provisioning levels required as result of upcoming SREP process or otherwise. Any such changes may be materially adverse
(2) The issuance is conditional upon BOCH completing the reclassification of share premium to distributable reserves, which was approved at BOCH's Annual General Meeting and requires the subsequent
approval by the Irish Court pursuant to section 85(1) of the Companies Act 2014 of Ireland. The consent of the ECB for the Capital Reduction is required before it is approved by the Irish Court
Organic NPE reduction continued in 3Q2018 in line with guidance
2 1
1
-€2.03 bn -€1.06 bn
Group € bn
3,4 3,4
6
(1) FY2017 inflows and curing of restructured loans and collections of NPEs include loans of €209 mn which exited NPE via curing in1Q2017 but then had to be re-included in 4Q2017 as NPE
waiting to exit due to technical parameters changes (previously restructured corporate exposures re-classified into NPEs during 4Q2017)
(2) Write offs in 9M2018 include a net impact of c.€11 mn of IFRS 9 grossing up and set offs
(3) Includes consensual (debt for asset swaps, DFAs) and non consensual foreclosures and debt for equity swaps
(4) Value of on boarded assets is set at a conservative 25%-30% discount from open market valuations, by two independent sources
(5) Calculations assume Significant Risk Transfer benefit from Helix, which as at the date of slides has not been approved by the ECB (refer to slide 35). Calculations assume no changes in capital or
provisioning levels required as result of upcoming SREP process or otherwise. Any such changes may be materially adverse
(6) Reclassification between gross loans and expected credit losses on loans and advances to customers classified as held for sale
5
6
1
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0.14 0.09 0.08 0.05 0.06 0.09
0.04
0.09 0.12
0.06 0.04 0.04
0.02 0.05
0.27
0.04
0.22
0.02
0.23 0.21
0.13
0.36
0.14
0.33
0.11
1Q2017 2Q2017 3Q2017 4Q2017 1Q2018 2Q2018 3Q2018
Redefaults New inflows Unlikely to pay
(0.50) (0.40)
(0.29) (0.18) (0.17)
(0.34)
(0.09)
(0.11)
(0.10)
(0.09) (0.16)
(0.09)
(0.07)
(0.05)
(0.22)
(0.25)
(0.19) (0.29) (0.39)
(0.29)
(0.13)
(0.01)
-
(0.10) (0.07)
0.04
(0.01)
(0.05)
(0.84) (0.75)
(0.67) (0.70) (0.61)
(0.71)
(0.32)
1Q2017 2Q2017 3Q2017 4Q2017 1Q2018 2Q2018 3Q2018
Curing of restructured loans DFAs & DFEs Write offs and non contractual write offs Other (Interest / Collections / Change in balances)
7
c.€0.3 bn NPE outflows in 3Q2018, leading to €224 mn organic NPE reduction post Helix
(1) Quarterly 2017 inflows and curing of restructured loans and collections of NPEs include loans of €209 mn which exited NPE via curing 1Q2017 but then had to be re-included in 4Q2017 as NPE waiting
to exit due to technical parameters changes (previously restructured corporate exposures re-classified into NPEs during 4Q2017)
Cyprus operations (€bn)
1
Outflows of NPEs on curing and exits (€ bn)
NPEs inflows (€ bn)
Adversely impacted by reclassification
into NPEs of €209 mn previously
restructured corporate exposures.
Impacted by a reclassification of a
Corporate Performing customer
Group of €150 mn
Cyprus operations (€bn)
1
1
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11.4
7.2 6.3
4.0
0.6
0.3
0.2
0.2
2.0
1.3
1.1
0.8
14.0
8.8
7.6
5.0
Dec 15 Dec 17 Sep 18 Sep 18pro forma for Helix
Non Core NPEs (€ bn) Dec 15 Dec 16
Dec 17
After RRD
reorganisation2 Sep 18 Helix
Sep 18
Pro forma for Helix3
Sep 18 Provision Coverage
Pro forma for Helix3
Corporate 1.5 1.2 0.9 0.7 (0.2) 0.5
SMEs 0.4 0.6 0.4 0.3 (0.1) 0.2
Retail 0.7 0.5 0.3 0.3 (0.0) 0.3
Total Non Core NPEs 2.6 2.3 1.6 1.3 (0.3) 1.0 15%
Core NPEs (€ bn)
Corporate 5.7 3.8 3.0 2.4 (1.6) 0.8
SMEs 3.1 2.6 1.7 1.7 (0.6) 1.1
Retail 2.6 2.4 2.5 2.2 (0.1) 2.1
Total Core NPEs 11.4 8.7 7.2 6.3 (2.3) 4.0 57%
Core NPEs
0.1 0.0 0.1
0.5
0.2 0.1
0.6
0.2 0.2
up to 31 Dec2019
2020 2021+
No impairments no arrears
No arrears but Impaired
Exit dates for non core NPEs
€1.0 bn NPEs with no arrears1
€ bn
(1) In pipeline to exit NPEs subject to meet all exit criteria; Until 31 March 2018, the analysis was performed on an account basis. As from 30 June 2018, the analysis is performed on a customer basis.
(2) An internal reorganisation of RRD took place in 4Q2017. €400 mn were transferred from SMEs to Corporate (€300 mn) and Retail (€100 mn)
(3) Calculations assume Significant Risk Transfer benefit from Helix, which as at the date of slides has not been approved by the ECB (refer to slide 35). Calculations assume no changes in capital or
provisioning levels required as result of upcoming SREP process or otherwise. Any such changes may be materially adverse
Core NPE risk at €4.0 bn3 down by 65% since 2015 and 57% covered
Non Core
NPEs
Core NPEs
% of Gross Loans
50%
36%
Provision coverage
38%
54%
7%
30%
Core NPEs
39%
59%
Core NPEs
Forborne
No impairment
No arrears1
NPEs
No arrears but
impaired
€ bn
8
57%
15%
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Clear strategy for residual NPEs
9
1,4
Corporate
Non Core
30 Sept 2018
Estia
5,0
Retail-
Non Estia eligible
0,8
SME 0,9
0,9
1,0
1
Group NPEs (€ bn) pro forma for Helix2
Organic reduction of €224 mn on residual portfolio in 3Q2018, in line with target of c.€200 mn reduction per quarter
(1) ESTIA-eligible portfolio refers to the potentially eligible portfolio based on the Bank’s available data. Further, eligibility w ill be assessed on an individual level and borrowers will be eligible if they apply and
meet the specific criteria of the Scheme as announced by the Government. The terms of the scheme are subject to finalisation
(2) Calculations assume Significant Risk Transfer benefit from Helix, which as at the date of slides has not been approved by the ECB (refer to slide 35). Calculations assume no changes in capital or
provisioning levels required as result of upcoming SREP process or otherwise. Any such changes may be materially adverse
(3) Contractual balance as at 30 September 2018 of Core NPEs pro forma for Helix is c.€6.0 bn
Core NPEs3
€4.0 bn
Non Core NPEs
€1.0 bn
Non Core NPEs
• Expect €1.0 bn to exit NPEs in the forthcoming years (see slide 8)
• Monitoring redefaults & quality of restructurings
Core NPEs-ESTIA (see slide 10)
• Gov’t-led scheme1 expected to go live in early 2019 aimed at addressing
NPEs backed by primary residence
• Expected to address up to € 0.9 bn1 stickier Retail Core NPEs, subject to
eligibility criteria and participation rate
• Clear definition of socially protected borrowers, acting as enabler
against strategic defaulters
Core NPEs-Retail, non-Estia eligible
• Additional focus of management on Retail, non Estia eligible, exposures
• Incremental servicing engine powered by external party (Pepper)
• New product range
Core NPEs - SMEs & Corporate
• Focus on write offs and realising collateral via consensual & non consensual
foreclosures
• On board assets in REMU at conservative c.25%-30% discount to open
market value (OMV)
• Continue to explore future structured sale solutions to further accelerate de-
risking
Foreclosures (see slide 11)
• Strengthening foreclosure team
• Foreclosure on strategic defaulters
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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 with loans linked to a Primary Residence (PR) with OMV ≤ €350k
• At least 20% of the total borrower’s credit exposures > 90 days past due as at 30 Sept 2017
• Annual gross income < €20k to €60k, ranging from €20k for single persons to €60k for couples with 4 dependents or
more
• Other Household’s net assets, excluding the PR <80% of the OMV of the PR. Cap on value of asset of €250k
• Borrower permanent resident of Cyprus Republic in the last 10 years
• Restructured loans will exit NPE definition in accordance to the NPE exit criteria3
• Scheme expected to go live early 2019
Scheme
summary
Actions undertaken to assess eligibility and built ESTIA portfolio in advance
Estia perimeter identified2 (based on OMV)
• c. 5K customers2, c.10K loan facilities2 with Gross Book Value (GBV) c.€0.9 bn2
Set up of a dedicated specialised team
• Developed an industrialised process to handle large volumes of applications in short time frames
• Dedicated staff to quickly assess applications
Contact strategies developed to ensure high participation
• Introductory letter sent to customers to create awareness
• Follow up letters with launch of the scheme
BOC
Current actions
Expected to facilitate decrease of stickier component of NPEs
Clear definition of socially protected borrowers, acting as enabler against non- Estia eligible borrowers
(1) As approved by the Cabinet on 1st November 2018. The scheme is pending approval by the European Commission
(2) ESTIA-eligible portfolio refers to the potentially eligible portfolio based on the Bank’s available data. Further, eligibility will be assessed on an individual level and borrowers, will be eligible if they apply and
meet the specific criteria of the Scheme as announced by the Government
(3) Please refer to slide 66 for the NPE forborne exit criteria 10
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Foreclosures becoming an important tool in NPEs resolution
11
352
913 1,184
FY2016 FY2017 9M2018
Foreclosure commenced1 for 2,449 properties (cumulative) with value c.€800 mn
• Negotiations trigger
rate3: 60%
Strategy going forward
• Increase volume of foreclosures on terminated exposures to trigger active negotiation
• Actively driving foreclosures on Retail delinquent borrowers, non-ESTIA eligible
• Repossess after 6 months from date of first unsuccessful auction
# properties for which foreclosure process commenced1
Amendments in Foreclosure law approved in July 2018 strengthened the foreclosure framework via:
Clarifying and limiting the reasons for setting aside the foreclosure process through court
Enhance auction routes
• Introduction of e-auctions (under development)
Reduce time of re-possession
• Wait period reduced from 12 to 6 months from date of first unsuccessful auction
381
159
49
589
589 properties resolved, c.500 properties in the
pipeline for repossession2
Consensual
foreclosures
Sold at the
auction
Repossessed
(1) The foreclosure process is considered to have commenced upon serving notice to the mortgagor.
(2) Properties that have been auctioned unsuccessfully at least once.
(3) Negotiations triggered after serving notice to the mortgagor
Quarterly Cost of Risk - Group (excluding additional provisions in 2Q17)
Quarterly Cost of Risk - Group (including additional provisions in 2Q17)
Coverage & Collateral maintained post Helix
12
41%
48%
52%
52%
49%
68%
67%
70%
70%
69%
109%
115%
122%
122%
118%
Dec 16 Dec 17 Jun 18 Sep 18 Sep2018
pro forma forHelix
Loan loss reserves Tangible Collateral
(1) Provisions for impairment of customer loans and gains/(losses) of derecognition of loans and changes in expected cash flows on acquired loans over average loans. Additional provisions of c. €500 mn
charged in 2Q2017 are included in the calculation of Cost of Risk but are not annualised
(2) Based on EBA Risk Dashboard as at 30 June 2018
(3) Restricted to Gross IFRS balance
(4) Calculations assume Significant Risk Transfer benefit from Helix, which as at the date of slides has not been approved by the ECB (refer to slide 35). Calculations assume no changes in capital or
provisioning levels required as result of upcoming SREP process or otherwise. Any such changes may be materially adverse
Quarterly CoR at 0.7% NPE total coverage at 118% when collateral included
NPE provision coverage remains above EU average post de-risking
Additional provisions of c.€500 mn
3 1
66
%
65
%
63%
62
%
62
%
61
%
60
%
59
%
54
%
54
%
52
%
52
%
49
%
49
%
46
%
44
%
44
%
40
%
40
%
36
%
35
%
31
%
30
%
29
%
28
%
27
%
27
%
26
%
26
%
25
%
24
%
HU PL SK RO CZ SI BG HR IT AT PT FR GR BOC BE CY ES DE LU IS* LV GB IE MT DK NL SE LT NO EE FI
30 Sep 2018
Pro forma for
Helix 4
EU average2: 44%
4
1
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114
REMU sale agreements of €410 mn YTD, including CyREIT disposal
€250 mn organic sales agreed in 9M2018; profit of €32 mn for sold assets of €189 mn
13
Organic sales achieved comfortably above Book Value
• 430 properties sold, representing
c.14% of total REMU properties
• SPAs signed for 50 additional
properties
• Agreement signed for the disposal of
CyREIT6, resulting in a revaluation
loss of €14 mn recorded in 3Q2018,
relating to both properties and other
receivables
• Encouraging trends on real estate
market
• Residential Property prices up 1.7%
yoy4
• Sale contracts (excluding DFAs) up
19% yoy5
• c.55% of properties sold ytd (in
value) relate to land
(1) Amounts as per Sales purchase Agreements (SPAs)
(2) Proceeds after selling charges and other leakages
(3) Proceeds before selling charges and other leakages
(4) Based on Cyprus Central Bank report – Residential Prices Index, published 18 October 2018
(5) Based on data from Land of Registry – Sales contracts
(6) Alternative Investment Fund listed on the Non Tradable Investment Schemes Market of the CSE,
comprising commercial income generating real estate assets in Cyprus
Sales contract prices1 (€ mn)
Sales contract prices1 (€ mn)
365
189
105
61
SPA signed In process SPA in preparation
10
Offers accepted Sold
189
106
28
28
27
Total Sales (YTD) Hotels Commercial Residential Land
(1) 4Q2017, 1Q2018, 2Q2018 and 3Q2018 include €90 mn, €64 mn, €81 mn and €64 mn housing loans respectively
Tourism & Trade core sectors
New lending maps to core sectors driving GDP growth
97% of new lending in Cyprus since 2016 is performing
New Lending (Cyprus)
1 1 1 1
0.1
0.1
0.4
0.5
0.7
1.0
1.4
Other
Real Estate
Industry
Public, education & health
Professional & admin
Construction
Tourism, trade and transport
9M2017
€1.3 bn
9M2018
€1.5 bn
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114
Capital and Funding Position
15
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114
13.2%
16.2%
1.5%
1.5%
CET 130 Sept 2018pro forma for
Helix
Existing T2 AT1issuance
Total Capitalratio
pro forma forHelix and AT1
issuance
12.2
%
12.7
%
14.2
%
11.5
%
11.9
%
13.4
%
11.6
%
11.9
%
13.4
%
12.8
%
13.2
%
16.2
%
CET 1 fully loaded CET 1 ratio Total capital ratio
Dec 2017 Jun 2018 Sep 2018 Sep 2018 CET1 pro forma for Helix & TCR pro forma for Helix and AT1
Continued reduction in RWA intensity
85% 85% 85%
73% 77%
73% 71%
65%
Dec 14 Dec 15 Dec 16 Dec 17 Mar 18 Jun 18 Sep 18 Sep 18pro forma for
Helix
Capital Position
16
(1) The CET1 FL ratio for 30 September 2018, including the full impact of IFRS 9 amounts to 9.7% and 10.9% pro forma for Helix
(2) Transitional (phase-in adjustments of DTAs, and reserve movements)
(3) The issuance is conditional upon BOCH completing the reclassification of share premium to distributable reserves, which was approved at BOCH's Annual General Meeting and requires the
subsequent approval by the Irish Court pursuant to section 85(1) of the Companies Act 2014 of Ireland. The consent of the ECB for the Capital Reduction is required before it is approved by the Irish
(4) Calculations assume Significant Risk Transfer benefit from Helix, which as at the date of slides has not been approved by the ECB (refer to slide 35). Calculations assume no changes in capital or
provisioning levels required as result of upcoming SREP process or otherwise. Any such changes may be materially adverse
(5) Transitional (including IFRS 9 transitional arrangements) (6) Regulatory deductions of c.15 bps mainly due to clarifications provided by the EBA regarding the treatment of IFR9 for the calculation of the DTA-related thresholds
(1) The surplus relates to the Bank’s LCR add-on requirement
(2) The local regulatory liquidity requirements set by the Central Bank of Cyprus (“CBC”) were abolished on 1 January 2018 and were replaced with a liquidity add-on requirement imposed on top of LCR in
the case of BOC PCL, which became effective on 1 January 2018
(3) NSFR was not introduced on 1 January 2018, as opposed to what was expected. 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 standards. Its calculation is a SREP requirement. EBA is working on finalising the NSFR and enforcing it as a regulatory ratio
(4) Origin is defined as the country of the passport of the Ultimately Beneficial Owner
10.93 11.35
11.82 12.11 12.48 13.04
4.08
4.24 4.16
4.00 4.00
3.81
15.01
15.59 15.98 16.11
16.48 16.85
Jun 17 Sep 17 Dec 17 Mar 18 Jun 18 Sep 18
Cyprus non-IBU Cyprus IBU
65%
21%
3% 5%
6%
Cyprus
Other EU
Other European Countriesexcluding RussiaRussia
Other Countries
Cyprus deposits by
passport origin4
10% YTD increase in local deposits, more than offsets the 8% YTD reduction in IBU deposits
Legacy book interest income on loans (pro forma for Helix1) for 3Q2018 at €36 mn
Structural drivers:
• Curing of restructured loans, DFAs, cash collections of interest on delinquent exposures
Performing book interest income on loans (pro forma for Helix1) for 3Q2018 at €87 mn
Structural drivers:
• Competition pressure on lending rates due to sustained low interest rate environment
B
Balance sheet de-risking results in a smaller but safer loan book
19
B
A
€ mn (pre FTP)
A
Interest Income on Loans: Performing vs Legacy Net Loans: Performing vs Legacy
Interest Income on Loans flat qoq at €123 mn after deconsolidation of UK subsidiary and pro forma for Helix
(1) Calculations assume Significant Risk Transfer benefit from Helix, which as at the date of slides has not been approved by the ECB (refer to slide 35). Calculations
assume no changes in capital or provisioning levels required as result of upcoming SREP process or otherwise. Any such changes may be materially adverse
1
excl. BOC UK and pro forma for Helix
12.6
€ bn
excl. BOC UK
12.5 125 123 123
1
Representation for deconsolidation of UK subsidiary
Risk adjusted yield will rise as Legacy book reduces
Corporate
IB, W&M
SME and Retail Banking
Insurance and Other incl H/O
RRD
Overseas non core
REMU
20
• Performing Book is expected to
grow and to increasingly drive
Group results
• Legacy book revenues
predominantly driven by
provisioning unwinding (but
offset via provisions for neutral
P&L impact)
• As Legacy book reduces:
Group risk adjusted yield
expected to rise
Group Risk intensity
expected to fall supporting
CET1 ratio build
374 403 404
632 617 613
30 7 6
-85 -75 -66
1Q2018w/o UK
2Q2018w/o UK
3Q2018w/o UK
Performing Legacy
Liquids Cost of funding
Drivers of NIM
48% 48% 48%
23% 23% 21%
29% 29% 31%
FY2017w/o UK
1H2018w/o UK
9M2018w/o UK
Performing Legacy Liquids
€18.2 bn
0.06%
6.13%
4.04%
Effective yield
Liquidity build up
• Liquid assets1 increased qoq at €6.2 bn
Balance sheet de-risking –smaller but safer loan book
• Higher-yielding, higher-risk legacy loans are reducing as we
successfully exit NPEs
Loan yields
• Legacy book yields are volatile affected by the timing of cash
collections
• Performing book yields are resilient at around 4% despite modest
market pressure
• Overall customer franchise stable qoq at 338 bps
Cost of funding
• Reduced to 66 bps, positively affected by the 10 bps reduction in cost
of deposits in Cyprus
• Overall cost of deposits reduced by over 25 bps in 9M2018
8.6 8.7 8.9
4.4 3.7 3.3
5.1 5.6 6.2
3.4 3.5 3.7
21.5 21.5 22.1
Dec 17w/o UK
Jun 18w/o UK
Sep 18w/o UK
Performing Legacy Liquids Non int-producing
256
NIM
AIEA w/o UK
338 bps
performing
yield net of
funding
(bps)
21
Total Assets (€ bn) AIEA mix (% Total) Effective yield on assets & cost of funding
254 247
1 1
€17.9 bn €18.0 bn
2 3
(1) Cash, placements with banks, balances with central banks and bonds
(2) Effective yield of liquid assets: Interest income on liquids after hedging, over average liquids (Cash and balances with central banks, placements with banks and
bonds). Historical information has been adjusted to take into account hedging
(3) Effective yield of cost of funding: Interest expense of all interest bearing liabilities after hedging, over average interest bearing liabilities (customer deposits, funding
from the central bank, interbank funding, subordinated liabilities). Historical information has been adjusted to take into account hedging
49
133
156
255
192
0
127
127
127
0
153
204
191
191
191
203
224
230
234
234
234
0
97
114
43 45 39 41 43
15 11 12 13 13
11 5 19
3
-6
14 22
35
17 16
83 83
105
74 66
3Q2017 4Q2017 1Q2018 2Q2018 3Q2018
Net FX gains/(losses) & Net gains/(losses) on other financial instruments, and other income
Gains/(losses) from revaluation and disposal of investment properties and on disposal of stock of properties
Insurance income net of insurance claims
Net fee and commission income
21% 22%
Recurring income
18% 22% 24%
% Net fee and commission
income % Total income
22
Non interest income of €66 mn in 3Q2018
Analysis of Non Interest Income (€ mn) – Quarterly
58 56 51 54 56
• Recurring income of €56 mn for 3Q2018, compared to €54 mn in 2Q2018
• Net fee and commission income accounts for 24% of total income for 3Q2018, compared to 22% the previous quarter
• Net losses1 amounted to €6 mn, compared to gains of €3 mn for 2Q2018, including a net profit from the disposal of stock of properties of
€8 mn (REMU gains) and a revaluation loss of €14 mn from the disposal3 of CyREIT, relating to both properties and other receivables
• Net gains on other financial instruments2 of €16 mn for 3Q2018, compared to €17 mn in 2Q2018
Representation for deconsolidation of UK subsidiary
2
1
(1) Gains/(losses) from revaluation and disposal of investment properties and on disposal of stock of properties
(2) Net FX gains/(losses) & Net gains/(losses) on other financial instruments, and other income
(3) Alternative Investment Fund listed on the Non Tradable Investment Schemes Market of the CSE
49
133
156
255
192
0
127
127
127
0
153
204
191
191
191
203
224
230
234
234
234
0
97
114
39% 40% 41% 42% 41% 46% 47%
1Q2017 1H2017 9M2017 FY2017 1Q2018 1H2018 9M2018
Cost to Income ratio excluding special levy on banks and SRF contibution
Representation for deconsolidation of UK subsidiary
Total Expenses
23
6 6 5 6 7 5 6
6
-6
1Q2017 2Q2017 3Q2017 4Q2017 1Q2018 2Q2018 3Q2018
Special Levy SRF contibution
Cost to Income Ratio (C/I ratio)
Total operating expenses (€ mn)
Special Levy and SRF contribution (€ mn)
• C/I ratio at 47% for 9M2018 (excl special levy on banks and
SRF contribution) after deconsolidation of the UK
subsidiary, compared to 46% for 2Q2018 on the same basis
• Staff costs of €53 mn in 3Q2018 after deconsolidation of the
UK subsidiary, compared to €52 mn in 2Q2018 on the same
basis
• Other operating expenses decreased to €34 mn in 3Q2018
after deconsolidation of the UK subsidiary, compared to
€44 mn in 2Q2018 on the same basis, mainly due to elevated
costs in 2Q2018 relating to compliance and stress tests and
timing issue between 2Q2018 and 3Q2018
• Additional focus of management on costs
49 52 51 53 52 52 53
38 40 40 36 37 44 34
87 92 91 89 89 96 87
1Q2017 2Q2017 3Q2017 4Q2017 1Q2018 2Q2018 3Q2018
Staff costs Other operating expenses
Representation for deconsolidation of UK subsidiary
• Special levy and SRF contribution for 3Q2018 amounted
to €6 mn compared to €5 mn for 2Q2018
Updated 2019 and Medium Term Guidance will be communicated with FY2018 FR
€ mn 9M2018
w/o UK
9M2017
w/o UK
3Q2018
w/o UK
2Q2018
w/o UK qoq % yoy%
Net Interest Income 340 426 113 114 0% -20%
Non interest income 246 234 66 74 -12% 5%
Total income 586 660 179 188 -5% -11%
Total expenses (291) (287) (93) (101) -7% 1%
Profit before provisions and impairments 295 373 86 87 -2% -21%
Loan loss provisions (128) (730) (29) (41) -30% -82%
Impairments of other financial and non financial
instruments (13) (37) 1 (6) - -67%
Provision for litigation and regulatory matters (9) (69) (15) 7 - -87%
Total Provisions and impairments (150) (836) (43) (40) 6% -82%
Profit/(loss) before tax and restructuring costs 153 (458) 47 50 -7% -
Profit/(loss) after tax and before restructuring costs
and before Helix and UK sale 152 (533) 48 50 -5% -
SOURCE: Statistical Service of Republic of Cyprus; Bloomberg;
1) All the above bonds are normalised against Germany Government bond with maturity 15/8/2025 except Greece
2) Due to the Debt swap of the Hellenic Republic, from November 2017 onwards data for the new Hellenic Republic Bond with maturity 30/01/2028 was used and normalised against the closest maturity of
German Government bond (DBR) 15/08/2027
3) Official estimate from Eurostat’s monthly data 27
Cyprus economy recovering strongly…
CCC
S&P credit ratings Spreads (%)
4.1 4.0 3.6
1.3 0.4
-2.9
-5.8
-1.3
2.0
4.8 4.2 3.8
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10
Q4
11
Q1
11
Q2
11
Q3
11
Q4
12
Q1
12
Q2
12
Q3
12
Q4
13
Q1
13
Q2
13
Q3
13
Q4
14
Q1
14
Q2
14
Q3
14
Q4
15
Q1
15
Q2
15
Q3
15
Q4
16
Q1
16
Q2
16
Q3
16
Q4
17
Q1
17
Q2
17
Q3
17
Q4
18
Q1
18
Q2
18
Q3
Real GDP Quarterly SA % change y-o-y Real GDP SA annualised % change y-o-y
GDP growth of 4.1%, 4% and 3.6% yoy in Q1, Q2, & Q3 2018 SA (seasonally
adjusted) Unemployment rate dropped to 9.4% in Q1 & 8.1 in Q2, 2018 (seasonally adjusted)
Cyprus upgraded to investment grade by S&P and Fitch Reduction in spreads as a result of reduction in government bond yields
Employment in 000s (4Q average NSA (RHS) Unemployment rate SA (%)
3
BB-
BBB-
BBB
A-
B
BB+
BBB
BBB+
A- A+
CC
49
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0
127
127
127
0
153
204
191
191
191
203
224
230
234
234
234
0
97
114
28
… driven by tourism, professional services and construction activity
19.3 19.4 13.1
54.9
28.8 33.5
-60.0
-40.0
-20.0
0.0
20.0
40.0
60.0
% changes year-on-year
Production index in construction Building permits volume
33.0%
30.0%
29.0%
25.0%
24.0%
21.0%
19.0%
12.5%
12.5%
Corporate tax rate (2018)
Double taxation
avoidance
treaties with more
than 60 countries
37.9%
39.0%
23.1%
Upper secondary
Less than
Upper secondary
Tertiary
Level of education 2017, age 15-64
Cyprus has the highest number of
university graduates in the population
in the EU after the UK and Ireland
Economic activity has been broadly based with
main drivers tourism and construction Tourism arrivals (mn) Tourism: % changes y-o-y
Construction activity – strong recovery Support from key business enablers
0.81 0.59 0.39
0.70 1.26
1.01
1.31
1.63
1.45
0.68
0.44
0.67
1.45 0.60
0.67
2016Y 2017Y 2018Q2
Contribution to growth of real GVA
Other services
Professional
Tour, trade, transp.
Constr.
Agri&Indu
4,84 4,25 4,03
Total GVA (RHS)
SOURCES; Statistical Service of Republic of Cyprus, Eurostat; Calculations by BOC Economic Research
(1) Due to chain linking there is no additivity for total GVA
1
2.2 2.4 2.5 2.4 2.4
2.7
3.2
3.7 3.7
3.4
8.9
19.8
14.6
7.8
4.4
11.9 11.7
2.4
2015 2016 2017 2018 Jan-Oct(Jan-Augreceipts)
Total arrivals (% change) Total receipts (% change)
49
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127
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127
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153
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29
Appendix-Helix additional information
49
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0
127
127
127
0
153
204
191
191
191
203
224
230
234
234
234
0
97
114
Impact of Helix on 9M2018 Financial Results
30
Asset Quality 30.09.2018 Helix
30.09.2018
pro forma1
for Helix
Gross Loans 16.2 (2.8) 13.4
NPEs 7.6 (2.6) 5.0
NPE ratio 47% 37%
LLP 4.0 (1.6) 2.4
Net NPEs 3.6 (1.0) 2.6
Provision coverage 52% 49%
Accelerated de-risking
• €2.6 bn or 35% reduction in gross NPEs
• Provisions coverage remains adequate at 49%
• Organic NPE reduction expected to continue at a pace of
c.€200 mn per quarter, as portfolio size and business line mix
changed radically
(1) Calculations assume Significant Risk Transfer benefit from Helix, which as at the date of slides has not been approved by the ECB (refer to slide 35). Calculations assume no changes in capital or
provisioning levels required as result of upcoming SREP process or otherwise. Any such changes may be materially adverse
Balance Sheet 30.09.2018 Helix
30.09.2018
pro forma1
for Helix
Liquid Assets 6.2 1.2 7.4
Net Loans 12.2 (1.2) 11.0
Total Assets 22.1 22.1
Deposits 16.9 16.9
IEA 18.4 18.5
L/D 72% 65%
Loans % Total Assets 55% 50%
Liquids/ Total Assets 28% 34%
Liquids % IEA 34% 40%
A more liquid balance sheet
• Loan to deposit ratio of 65% from 72%
• Loan/Assets decrease to 50% from 55%
• Liquid assets (cash, bank loans & securities) increased to
Eur7.4 bn, representing 34% of assets and 40% of interest
earnings assets, and will weigh on net interest income and
NIM until redeployment into higher yielding assets
49
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127
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234
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97
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31
P/L 9M2018 Helix
9M2018
pro forma
for Helix1,2
Net Interest Income 340 (66) 274
Other Income 246 (1) 245
Total Income 586 (67) 519
Costs (291) 5 (286)
Operating Profit 295 (62) 233
Provisions (128) (128)
Profit before Tax
and restructuring
costs
153 (62) 91
Impact of Helix on 9M2018 Financial Results
(1) Calculations assume Significant Risk Transfer benefit from Helix, which as at the date of slides has not been approved by the ECB (refer to slide 35). Calculations assume no changes in capital or
provisioning levels required as result of upcoming SREP process or otherwise. Any such changes may be materially adverse
(2) Ignoring impact on NII from cash and bond to be received on completion
Capital Position 30.09.2018 Helix
30.09.2018
pro forma
for Helix1
RWAs (€ bn) 15.7 (1.3) 14.4
CET 1 (€ bn) 1.9 1.9
CET 1 ratio (%) 11.9% 13.2%
RWA intensity 71% 65%
Pro forma capital strengthened due to corporate actions
• RWA reduced by €1.3 bn, or 9%
• Risk intensity reduced to 65% from 71%
• CET 1 uplift of 130 bps
49
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127
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114
30 September 2018
Assets sold (based on carrying value as at 30 June 2018, before the
impact of the Transaction on the 2Q2018 income
statement) € bn Receipts € bn
Contractual Loans1 5.71 Consideration 1.38
Gross Loans 2.81 of which:
of which NPEs 2.70 - Cash 1.03
Provisions Held (1.44) - Bonds 0.35
Other2 0.10 Transaction Costs and other
adjustments3 (0.06)
Carrying Value of assets being sold 1.47 Consideration net of transaction
costs and other adjustments3 1.32
P/L Impact: (0.150)
32
Helix key highlights
(1) Based on Group Financial Results for the three months ended 31 March 2018
(2) DFAs and cash already received by 30 June 2018
(3) Adjusted with 3Q2018 impact following the additional NPV loss of €15 mn following extension of the expected completion date in 1Q2019. Includes c.€45 mn relating to the time value of money that
First sizeable Corporate and SME secured NPE sale in Cyprus (15% of Cyprus GDP)
Update
• As at 30 Sept 2018 portfolio includes €2.8 bn gross loans,
of which €2.6 bn gross NPEs and €60 mn properties
• Completion is expected by 1Q2019 and is subject to a
number of Conditions Precedent (mainly regulatory and
other approvals), including the ECB agreeing to a
Significant Risk Transfer (“SRT”) benefit from the
transaction
Helix Portfolio (€ bn )
Core NPEs: Retail SMEs Corporate
Non Core NPEs
Performing
€2.6 bn
NPEs
49
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127
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0
153
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• The transaction intends to follow the below broad key steps:
• The portfolio will be transferred by the Bank of Cyprus (Seller) to a licensed Cypriot Credit Acquiring Company (“CyCAC”).
• The transfer is expected to take place pursuant to a court sanctioned Scheme of Arrangement
• The shares in the CyCAC will initially be held by the Seller before being transferred to the SPV (exact mechanics dependent on
Court approval)
• The SPV will issue senior and junior debt instruments in the form of unrated tranches. The Bank is intending to participate in a
portion of the senior debt tranche subject to regulatory approvals
• Buyer will invest by way of junior loan made to the SPV (currently anticipated to be incorporated in Luxembourg and being a
member of the purchasing group)
• Economically, investors will receive interests in a tranched unrated structure
• The CyCAC will borrow money from the SPV
34
BoC (Seller) CyCAC Owning the Portfolio- servicing function expected to be
carried out by CyCaC
Senior Debt
Junior Debt
Scheme of Arrangement
SPV
Buyer to subscribe for
junior tranche
Shar
es
Sin
gle
Tran
che
of
Deb
t Senior financing commitments
subject to conditions precedent
The structure is set out below
Helix- Legal structure
Key Steps and Diagram
49
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35
Helix- Conditions Precedent in current draft SPA
Helix conditions precedent
Condition Precedent Description
Transfer of the Assets Transfer of the NPL Assets to the CyCAC in accordance with the Scheme of Arrangement (this is the arrangement as per
which the NPL Assets will be transferred by the Seller to CyCAC), subject to regulatory approval
Approval by Central Bank of Cyprus
(CBC)
The CBC having given notice that it has approved the acquisition of control by the Buyer over the CyCAC
Approval by European Central Bank
(ECB)
Confirmation from the European Central Bank that the Seller can recognise a significant credit risk reduction following the sale
of the Shares in CyCAC to the Buyer and the related financing
Approval by the Commission for the
Protection of Competition of Cyprus
(CPC)
The Commission for the Protection of Competition having given clearance to the acquisition of control by the Buyer over the
CyCAC
Closing Arrangements Set of closing obligations of each of the Seller and the Buyer
Transfer of tax losses The tax commissioner has provided approval that tax losses can be transferred to the CyCAC. The quantum of tax losses
transferred is not a condition to transfer. The Bank will separately give warranty comfort around the level of tax losses to be
transferred.
Note: Preliminary tax authority pre-approval of the reorganization plan subject to certain conditions and actions has already
been received.
Distributable reserves of CyCACs
The reduction in the share capital of the CyCAC to not more than EUR45,000,000. The share capital reduction is a court
approved process. The levels have been set to give significant headroom above current anticipated liabilities of the CyCAC.
Senior Financing The Buyer having entered into a Senior Facility Agreement (the SFA) of at least 65% of the purchase price.
To this effect, binding commitment letters and standard term sheets have been signed which include a MAC clause as follows:
the yield to maturity at which Republic of Cyprus’ 4.25% bonds due 2025 are trading not being 750 bps above the yield to
maturity at which Federal Republic of Germany’s 0.5% bonds due 2025 are trading for more than two consecutive weeks.
Pricing Adjustment
Prior to the completion, the conclusion of a reconciliation exercise to reconcile the property collateral included in the Bank’s valuation to which a positive value has been
ascribed and the sale and purchase agreements registered by the owner of the property and revealed by land registry searches. An expert will be appointed to conduct the
reconciliation. The findings of such reconciliation may result in certain downward adjustments to the purchase price. An accounting provision has been recorded in the
2Q2018 results to reflect the Bank’s current best estimate of this adjustment.
49
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Appendix – Additional asset quality slides
36
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 the NPE definition are considered to be
in default and hence credit-impaired and are classified in Stage 3 under IFRS 9 staging classification. Such loans are also considered to be in default for
credit risk management purposes.
49
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Foreclosure
Law
Amendments approved aim to strength the foreclosure framework via:
Clarifying and limiting the reasons for setting aside the foreclosure process through court
Enhance auction routes
• Introduction of e-auctions
Reduce the time of re-possession
• Wait period reduced from 12 to 6 months from date of first unsuccessful auction
Sale of Loans
Law
Amendments approved aim to improve the law and close current gaps that hindered the use of the law via:
Improving the framework around transfer of rights and obligations to the buyer
• Regulating the transfer of rights, obligations, benefits, continuity of lawsuits etc between parties
• Splitting of collateral to cover disposed part of loan in case of cross-collateralisation of loans
• Transfer of collaterals to the name of the buyer without further costs
Other
changes
Tax legislation
Incentives to customers agreeing consensual solutions continue including exception of capital gains tax and transfer fees
in sale of property to banks
Additional exemption for sale of property directly to third party introduced
Insolvency framework
Changes aim to close gaps and enhance the participation and applicability of personal repayment schemes for physical
persons
Securitisation
Law
Easier for banks to securitise NPLs
Regulated by CBC
Service time of Notices
Servicing Time + 40 days
Auction
Property transfer &
Distribution of proceeds
1-50 days immediately after
auction
TIMEFRAME
Valuations
30-1151 days
TOTAL TIME UP TO AUCTION: ~ 8 MONTHS
Foreclosure
Decision
Service
Announcement
3-5 days + Servicing
Time + 30 days
Improved Legislative Framework1 supporting realisation and disposal of collateral
(1) Amendments to the Foreclosure Legislation, the Sale of Loans Law, the Insolvency framework and the introduction of the Securitisation Law came into effect on 13/7/2018 37
Quarterly Provisions for impairment of customer loans (€ mn) NPEs provision coverage
Adequacy of provisions with NPE provision coverage at 52%
39
Quarter
Gross Contractual
Balance
€ mn
Surplus/(Gap) in
provisions
€ mn
No. of Customers
1Q2015 6.0 1.4 148
2Q2015 79.2 16.0 242
3Q2015 20.2 0.0 441
4Q2015 65.7 -2.1 551
1Q2016 158.3 0.5 1,276
2Q2016 266.9 12.1 2,298
3Q2016 124.5 13.9 115
4Q2016 71.9 -1.1 2,343
1Q2017 119.2 1.2 2,194
2Q2017 200.9 7.5 2,369
3Q2017 75.7 7.8 1,081
4Q2017 137.6 1.8 498
1Q2018 71.7 -3.9 427
2Q2018 44.1 2.6 390
3Q2018 37.4 -0.2 343
1,479.3 57.5 14,716
• Resolution of cases within provisions continued in 3Q2018
• Back-testing of c.14.7k fully settled customers over last 15
quarters on average within c.10% surplus over net book
value
NPE coverage at 52%
Back-testing of provisions supports past provision adequacy
49
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2.45
2.57
2.79
3.03
(0.12)
(0.31)
0.14
(0.05)
(0.57)
0.23 0.10
Sep 18 pro forma
Helix
Sep 18
Exits
Inflows
IFRS 9 adjustments
Dec 17
Exits
Inflows
Dec-16
Terminated Retail 1.20
Retail 1.25
Terminated SMEs 0.63
SME 0.58
Terminated Corporate
0.16
Corporate 1.01
Sep 2018pro forma for Helix
NPEs (Cy) €4.83 bn
1.21
1.21
1.94
1.94
2.17
2.00
2.00
2.00
2.96
2.96
(0.73)
(0.32)
0.09
0.17
(0.72)
0.16
(0.40)
Sep 18 pro forma
Helix
Sep 18
Exits
Inflows
IFRS 9 adjustments
Dec 17
Exits
Inflows
Dec-16
€1.17 bn
€1.21 bn
€2.45 bn
NPE ratio
1.17
2.90
3.68
4.51
(1.73)
(0.90)
0.35
(0.23)
(1.27)
0.14 0.30
Sep 18 pro forma
Helix
Sep 18
Exits
Inflows
IFRS 9 adjustments
Dec 17
Exits
Inflows
Dec 16
43%
NPE ratio 43%
Corporate
SME
Retail
NPE provision
coverage 49%
60%
NPE provision
coverage
Continuous progress across all segments
NPE total
coverage 121%
NPE total
coverage 120%
Focus shifts to Retail and SME after intense Corporate attention
40%
(1) Represents increase of the gross carrying amount on transition in line with IFRS 9 requirements net of non-contractual write offs executed during 1Q2018.
(2) Calculations assume Significant Risk Transfer benefit from Helix, which as at the date of slides has not been approved by the ECB (refer to slide 35). Calculations assume no changes in capital or
provisioning levels required as result of upcoming SREP process or otherwise. Any such changes may be materially adverse 40
1
1
1
24%
41%
105%
Sep 2018
Sep 2018
pro forma
For Helix
NPE ratio 60%
NPE provision
coverage 57%
NPE total
coverage 127%
50%
53%
123%
Sep 2018
42%
58%
120%
40%
Sep 2018
Sep 2018
pro forma
for Helix
2
Sep 2018
pro forma
For Helix
49
133
156
255
192
0
127
127
127
0
153
204
191
191
191
203
224
230
234
234
234
0
97
114
Gross loans & NPEs by Customer Type
9.47 9.04 9.01 8.65 8.60 7.00 5.14
4.35 4.03 3.51 3.66 3.53 3.22
2.45
4.22 4.12 4.17 4.27 4.22 4.05
4.04
2.09 2.06 2.06 2.01 1.96 1.93
1.82
20.13 19.25 18.75 18.59 18.31 16.20 13.45
Dec-16 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Sep-18pro forma for Helix
(1) Reporting as at 31 December 2017 includes transfers within RRD business lines following an internal reorganisation of RRD in 4Q2017
(2) Calculations assume Significant Risk Transfer benefit from Helix, which as at the date of slides has not been approved by the ECB (refer to slide 35). Calculations assume no changes in capital or
provisioning levels required as result of upcoming SREP process or otherwise. Any such changes may be materially adverse
49
133
156
255
192
0
127
127
127
0
153
204
191
191
191
203
224
230
234
234
234
0
97
114
45%
50%
49%
49%
41%
37%
45%
57%
57%
53%
21%
32%
39%
40%
40%
47%
55%
62%
60%
58%
39%
46%
51%
51%
47%
67%
66%
71%
72%
64%
72%
73%
70%
70%
70%
84%
83%
83%
83%
83%
52%
54%
56%
56%
56%
69%
69%
71%
71%
70%
112%
116%
120%
121%
105%
109%
118%
127%
127%
123%
105%
115%
122%
123%
123%
99%
109%
118%
116%
114%
108%
115%
122%
122%
117%
Dec2016
Dec2017
Jun2018
Sep2018
Sep2018pro
forma
Dec2016
Dec2017
Jun2018
Sep2018
Sep2018pro
forma
Dec2016
Dec2017
Jun2018
Sep2018
Sep2018pro
forma
Dec2016
Dec2017
Jun2018
Sep2018
Sep2018pro
forma
Dec2016
Dec2017
Jun2018
Sep2018
Sep2018pro
forma
Loan loss reserves Tangible Collateral
Total Cyprus Corporate SME Retail-Housing Retail-Other €1.3bn €1.2 bn €1.5 bn €1.0 bn
Pro forma NPEs
2,3
NPE provision coverage and Total coverage by segment (Cy)
42
Coverage and collateral maintained post Helix
1
2,3
Reporting from 31 December 2017 includes transfers within RRD business lines following an internal reorganisation of RRD in 4Q2017
2,3 2,3 2,3
€5.0 bn
Cyprus operations
(1) Restricted to Gross IFRS balance
(2) Pro forma data for Helix
(3) Calculations assume Significant Risk Transfer benefit from Helix, which as at the date of slides has not been approved by the ECB (refer to slide 35). Calculations assume no changes in capital or
provisioning levels required as result of upcoming SREP process or otherwise. Any such changes may be materially adverse
49
133
156
255
192
0
127
127
127
0
153
204
191
191
191
203
224
230
234
234
234
0
97
114
Asset Quality- NPEs analysis
(€ mn) Sep-18 Jun-18 Mar-18 Dec-17
A. Gross Loans after Fair value on Initial recognition 15,721 17,798 18,020 18,087
Fair value on Initial recognition 480 514 566 668
B. Gross Loans 16,201 18,312 18,586 18,755
B1. Loans with no arrears 8,330 10,097 9,922 9,565
B2. Loans with arrears but not NPEs 249 301 315 386
1-30 DPD 184 230 229 312
31-90 DPD 65 71 86 74
B3. NPEs 7,622 7,914 8,349 8,804
With no arrears 1,615 1,785 1,951 2,033
Up to 30 DPD 117 120 155 197
31-90 DPD 179 256 296 211
91-180 DPD 236 246 168 151
181-365 DPD 347 268 242 324
Over 1 year DPD 5,128 5,239 5,537 5,888
NPE ratio (NPEs / Gross Loans) 47% 43% 45% 47%
Accumulated provisions (including fair value adjustment on initial
recognition1) 3,993 4,100 4,245 4,204
Gross loans provision coverage 25% 22% 23% 22%
NPEs provision coverage 52% 52% 51% 48%
43 (1) Comprise (i) provisions for impairment of customer loans and advances, (ii) the fair value adjustment on initial recognition of loans acquired from Laiki Bank and on loans classified at
FVPL, and (iii) provisions for off-balance sheet exposures disclosed on the balance sheet within other liabilities
49
133
156
255
192
0
127
127
127
0
153
204
191
191
191
203
224
230
234
234
234
0
97
114
45%
54%
34%
71%
34%
47%
51%
54%
45%
53%
32%
76%
33%
45%
52%
51%
43%
53%
27%
73%
31%
44%
51%
50%
50%
52%
27%
69%
31%
43%
43%
36%
49%
53%
28%
68%
53%
43%
47%
34%
Trade Manufacturing Hotels and Catering Construction Real estate Private individuals Professional andother services
Other sectors
30.09.17 31.12.17 31.03.18 30.06.18 30.09.18
Analysis of Loans and NPEs ratios by Economic Activity
44
2.1
2
0.6
8
1.4
5 2.5
0
3.2
4
6.8
3
1.3
3
1.1
0 2.0
4
0.6
6
1.3
9 2.3
4 3.2
0
6.7
7
1.3
1
1.0
4 2.0
2
0.6
8
1.4
0
2.1
1 3
.29
6.8
2
1.2
3
1.0
4 1.9
7
0.6
8
1.3
6
2.0
4 3
.26
6.7
2
1.3
9
0.8
9 1.9
1
0.6
6
1.2
5
1.9
8
1.7
7
6.5
0
1.2
3
0.9
2
Trade Manufacturing Hotels & Restaurant Construction Real Estate Private Individuals Professional andother services
Other sectors
30.09.17 31.12.17 31.03.18 30.06.18 30.09.18
11% 12% 40% 8% 5%
% of total
12% 8% 4%
Gross loans by economic activity (€ bn)
NPEs ratios by economic activity
49
133
156
255
192
0
127
127
127
0
153
204
191
191
191
203
224
230
234
234
234
0
97
114
Rescheduled Loans for the Cyprus Operations
3.4 3.0 2.7 2.5 2.4
1.7 1.3 1.3 1.3 1.2
0.6 0.6
0.5 0.5 0.5
1.7
1.4 1.4 1.3 1.3
7.4
6.3 5.9 5.6 5.4
31.12.16 31.12.17 31.03.18 30.06.18 30.09.18
Retail housing Retail consumer SMEs Corporate
44%
41%
40%
27%
40%
40%
35%
27%
39%
38%
33%
27%
38%
38%
32%
27%
36%
37%
31%
27%
Corporate SMES Retail housing Retail Consumer
31.12.16 31.12.17 31.03.18 30.06.18 30.09.18
45
Rescheduled Loans1 by customer type (€ bn)
Rescheduled loans1 % gross loans by customer type Rescheduled loans – Asset Quality
30 September 2018 € ‘000
Stage 1 445,444
Stage 2 834,015
Stage 3 3,288,943
POCI 541,883
FVPL 276,390
Total 5,386,675
(1) Reporting as at 31 December 2017 includes transfers within RRD business lines following an internal reorganisation of RRD in 4Q2017
49
133
156
255
192
0
127
127
127
0
153
204
191
191
191
203
224
230
234
234
234
0
97
114
Gross loans and provisions by IFRS 91 stage
46
(1) The Group’s IFRS 9 impact on transition is assessed to result in a decrease of shareholders’ equity of €308 mn and is primarily driven by credit impairment provisions. Allowing for IFRS 9 transitional
arrangements for regulatory capital purposes in line with European Union Regulation (2018: 5%, 2019: 15%, 2020: 30%, 2021: 50% and 2022: 75%)
(2) Calculations assume Significant Risk Transfer benefit from Helix, which as at the date of slides has not been approved by the ECB (refer to slide 35). Calculations assume no changes in capital or
provisioning levels required as result of upcoming SREP process or otherwise. Any such changes may be materially adverse
(3) Includes purchased or originated credit-impaired
€bn
Gross Loans
30 Sep 2018
Provisions
30 Sep 2018
Gross Loans
30 Sep 2018 pro forma for Helix2
Provisions
30 Sep 2018 pro forma for Helix2
Stage 1 4,4 0.1 4.4 0.1
Stage 23 4.2 0.2 4.0 0.1
Stage 33 7.6 3.7 5.0 2.2
TOTAL 16.2 4.0 13.4 2.4
49
133
156
255
192
0
127
127
127
0
153
204
191
191
191
203
224
230
234
234
234
0
97
114
163 221 81 37 585 265 78 128
Residential Offices and other commercial properties Manufacturing and industrial Hotels Land and Plots Golf Under construction Greece and Romania
€ mn
Assets #
Total
REMU – stock of properties
47
Cyprus: €1,430 mn
€1,558 mn
#3,008 #1505 #56 #557 #226 #3 #9 #61 #591
REMU focus now on sales (Group)
Property stock split as at 30 September 2018 – on boarded at conservative carrying value (Group)
1641 1558
311
Stock as at
01 Jan 2018
Additions
(154)
Sales
(17)
Transfer to
Investment Properties
(166)
Impairment loss
(60)
Transfer to non-current
assets and disposal
groups held for sale
3
Foreign exchange and
other movements
Stock as at
30 Sep 2018
€ mn
BV
1,2
(1) Total stock as at 30 September 2018 excludes investment properties and investment properties held for sale
(2) Assets in REMU on boarded at conservative prices c.25%-30% discount to open market value (OMV)
49
133
156
255
192
0
127
127
127
0
153
204
191
191
191
203
224
230
234
234
234
0
97
114
SOURCE: Central Bank of Cyprus, Cyprus Land Registry
REMU – the engine for dealing with foreclosed assets
Book Value sales by type (Group) Book Value Sales of €154 mn for the 9M2018 (Group)
(1) 2Q2017 sales include a disposal of a property (€10 mn) which was classified in investment properties held for disposal
(2) 4Q2017 sales include a disposal of a property (€7.5 mn) which was classified in investment properties held for disposal
1 2
Encouraging trends in Real Estate Market; Property prices up 1.8% and 1.7% yoy respectively in 2018Q1 and Q2; Sale contracts (excl.
DFAs) in 2018Jan-Jul up 23.4% yoy
12,664
3,767 4,527
4,952 7,063
8,734 7,517
0
5,000
10,000
15,000
20,000
25,000
30,000
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
Jan
-Oct
Sales to Cypriots Sales to Non-Cypriots
Sales contracts – Excluding DFAs
73.2 75.3
1.4 1.5 1.8 1.7
-12.0
-10.0
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
110.0
120.0
201
0Q1
201
0Q2
201
0Q3
201
0Q4
201
1Q1
201
1Q2
201
1Q3
201
1Q4
201
2Q1
201
2Q2
201
2Q3
201
2Q4
201
3Q1
201
3Q2
201
3Q3
201
3Q4
201
4Q1
201
4Q2
201
4Q3
201
4Q4
201
5Q1
201
5Q2
201
5Q3
201
5Q4
201
6Q1
201
6Q2
201
6Q3
201
6Q4
201
7Q1
201
7Q2
201
7Q3
201
7Q4
201
8Q1
201
8Q2
Central Bank Residential Property Price index
Residential Propert Price index (2010Q1=100) % change y-o-y (RHS)
49
133
156
255
192
0
127
127
127
0
153
204
191
191
191
203
224
230
234
234
234
0
97
114 Loans and advances to customers
30 Sep 2018
(€ mn)
Cash 401
Securities 304
Letters of credit / guarantee 231
Property 18,061
Other 759
Surplus collateral (9,023)
Net collateral 10,733
Fair value of collateral and credit enhancements held by the Group
49
49
133
156
255
192
0
127
127
127
0
153
204
191
191
191
203
224
230
234
234
234
0
97
114
Appendix – Additional financial information
50
49
133
156
255
192
0
127
127
127
0
153
204
191
191
191
203
224
230
234
234
234
0
97
114
Assets (€ mn) 30.09.18 31.12.17
%
change
Cash and balances with
Central Banks 4,164 3,394 23%
Loans and advances to
banks 618 1,193 -48%
Debt securities, treasury bills
and equity investments 1,565 1,121 40%
Net loans and advances to
customers 11,051 14,602 -24%
Stock of property 1,558 1,641 -5%
Other assets 1,574 1,641 -4%
Non current assets and
disposal groups classified as
held for sale
1,521 7 -
Total assets 22,051 23,599 -7%
Liability and Equity (€ mn) 30.09.18 31.12.17
%
change
Deposits by banks 503 495 2%
Funding from central banks 830 930 -11%
Repurchase agreements 250 257 -3%
Customer deposits 16,850 17,850 -6%
Subordinated loan stock 264 302 -13%
Other liabilities 1,101 1,148 -4%
Total liabilities 19,798 20,982 -6%
Shareholders’ equity 2,206 2,586 -15%
Non controlling interests 47 31 51%
Total equity 2,253 2,617 -14%
Total liabilities and equity 22,051 23,599 -7%
Consolidated Balance Sheet
51
49
133
156
255
192
0
127
127
127
0
153
204
191
191
191
203
224
230
234
234
234
0
97
114
Assets (€ mn) 30.09.18 31.12.17
%
change
Cash and balances with
Central Banks 4,164 3,394 23%
Loans and advances to
banks 618 1,193 -48%
Debt securities, treasury bills
and equity investments 1,565 1,121 40%
Net loans and advances to
customers 12,235 14,602 -16%
Stock of property 1,618 1,641 -1%
Other assets 1,574 1,641 -4%
Non current assets and
disposal groups classified as
held for sale
277 7 -
Total assets 22,051 23,599 -7%
Liability and Equity (€ mn) 30.09.18 31.12.17
%
change
Deposits by banks 503 495 2%
Funding from central banks 830 930 -11%
Repurchase agreements 250 257 -3%
Customer deposits 16,850 17,850 -6%
Subordinated loan stock 264 302 -13%
Other liabilities 1,101 1,148 -4%
Total liabilities 19,798 20,982 -6%
Shareholders’ equity 2,206 2,586 -15%
Non controlling interests 47 31 51%
Total equity 2,253 2,617 -14%
Total liabilities and equity 22,051 23,599 -7%
Consolidated Balance Sheet – ignoring classification of Helix as Held for Sale
52
49
133
156
255
192
0
127
127
127
0
153
204
191
191
191
203
224
230
234
234
234
0
97
114
37.5% 37.1% 36.7% 37.5% 37.1% 37.4%
38.6%
45.4%
31.1% 30.8% 31.3% 32.3%
32.8% 34.1% 35.1%
36.3%
Dec 16 Mar 17 Jun 17 Sep 17 Dec 17 Mar 18 Jun 18 Sep 18
Loans new basis Deposits
Core Cypriot business
53 (1) The market share on loans was affected as at 30 September 2018 following a decrease in total loans in the banking sector, mainly attributed to €6 bn non-performing loans of Cyprus Cooperative Bank
(CyCB) which remained to SEDIPES (a legal entity without license to operate as a credit institution) as a result of the agreement between CyCB and Hellenic Bank
29.5% 29.5% 30.1% 30.9% 31.5%
33.2% 34.1%
35.5%
35.8% 34.5%
35.3% 36.8% 37.3% 37.1%
38.8% 39.3%
Dec 16 Mar 17 Jun 17 Sep 17 Dec 17 Mar 18 Jun 18 Sep 18
Residents Non-residents
1
Market shares1 Strong market shares in resident and non-resident deposits
Net foreign exchange gains and net gains on financial instrument transactions and disposal/dissolution of
subsidiaries and associates 52 18 70
Insurance income net of claims and commissions 38 - 38
Net gains from revaluation and disposal of investment properties and on disposal of stock of properties 16 - 16
Other income 17 - 17
Total income 586 15 601
Total expenses (291) (53) (344)
Operating profit 295 (38) 257
Provision charge (128) (165) (293)
Impairments of other financial and non-financial instruments (13) (2) (15)
Provision for litigation and regulatory matters (9) 9 -
Share of profit from associates and joint ventures 8 - 8
Profit/(loss) before tax, restructuring costs and discontinued operations 153 (196) (43)
Tax (4) - (4)
Loss attributable to non-controlling interests 3 - 3
Profit/(loss) after tax and before restructuring costs, discontinued operations and the NPE sale (Helix) 152 (196) (44)
Advisory and other restructuring costs – excluding discontinued operations and NPE sale (Helix) (26) 26 -
Profit/(loss) after tax – Organic 126 (170) (44)
Profit from discontinued operations (UK sale) 4 3 7
Restructuring costs relating to NPE sale (Helix) (17) 17 -
Loss relating to NPE sale (Helix) (150) 150 -
Loss after tax (attributable to the owners of the Company) (37) - (37)
Income Statement bridge1 for 9M2018
(1) Please refer to section F1 “Reconciliation of income statement between statutory and underlying basis” of the Group Financial Results for the nine months ended 30 September 2018
54
49
133
156
255
192
0
127
127
127
0
153
204
191
191
191
203
224
230
234
234
234
0
97
114
Analysis of Interest Income and Interest Expense
55
Analysis of Interest Income (€ mn) 3Q2017 4Q2017 1Q2018 2Q2018 3Q2018
Loans and advances to customers 166 155 147 147 143
Loans and advances to banks and central banks 3 3 4 1 0
Investments available-for-sale 5 6 - - -
Investment at amortised costs - - - 1 1
Investments FVOCI - - 5 5 5
Investments classified as loans and receivables 1 - - - -
175 164 156 154 149
Trading Investment - - - - -
Derivative financial instruments 8 9 9 9 9
Other investments at fair value through profit or loss - - - - -
Cyprus: Income Statement by business line for 9M2018
56
49
133
156
255
192
0
127
127
127
0
153
204
191
191
191
203
224
230
234
234
234
0
97
114
Risk Weighted Assets
57
(1) Other countries primarily relates to exposures in Serbia
(2) Calculations assume Significant Risk Transfer benefit from Helix, which as at the date of slides has not been approved by the ECB (refer to slide 35). Calculations assume no changes
in capital or provisioning levels required as result of upcoming SREP process or otherwise. Any such changes may be materially adverse
Total regulatory capital (Tier I + Tier II) 2,392 2,450 2,426 2,325 2,105
58 (1) Include unaudited / un-reviewed profits for 9M2017 or 1Q2018 where relevant
(2) Allowing for IFRS 9 transitional arrangements
Reconciliation of Group Equity to CET
Equity and Regulatory Capital
49
133
156
255
192
0
127
127
127
0
153
204
191
191
191
203
224
230
234
234
234
0
97
114
Capital Requirements Framework
59
Evolution of Capital Requirements
CET1 Requirements 9.500% 9.375% 10.500%6
(1) Company Information - Sample of 25 ECB supervised banks
(2) Currently P2R in the form of CET1 only
(3) Latest SREP requirements are effective as from 1 January 2018; for illustrative purposes, P2R are assumed constant for 2019
(4) In accordance with the legislation in Cyprus which has been set for all credit institutions the applicable rate of the CCB is 1.875% for 2018 and 2.5% for 2019 (fully phased-in)
(5) As per the EBA final guidelines on Supervisory Review and Evaluation Process (SREP) and supervisory stress testing and the Single Supervisory Mechanism’s (SSM) 2018 SREP
methodology issued in July 2018, CET1 held for purposes of P2G cannot be used to meet any other capital requirements (Pillar 1, P2R or the combined buffer requirements), and therefore
cannot be used twice. This will not apply for 2019, but it is expected to apply in the 2019 SREP cycle.
(6) Assumes P2R remains the same as 2018
(7) Calculations assume Significant Risk Transfer benefit from Helix, which as at the date of slides has not been approved by the ECB (refer to slide 35). Calculations assume no changes in
capital or provisioning levels required as result of upcoming SREP process or otherwise. Any such changes may be materially adverse
(8) Assumes issuance of €220 mn already priced in August 2018. The issuance is conditional upon BOCH completing the reclassification of share premium to distributable
reserves, which was approved at BOCH's Annual General Meeting and requires the subsequent approval by the Irish Court pursuant to section 85(1) of the Companies Act
2014 of Ireland. The consent of the ECB for the Capital Reduction is required before it is approved by the Irish Court.
• Pillar 2 Guidance5 (“P2G”): also reduced in 2018 (vs 2017)
- P2G may only be met with CET1 capital, and is ‘stacked’ above the Combined Buffer Requirement
- P2G does not impact the calculation of the Maximum Distributable Amount (“MDA”)
• O-SII Buffer: Bank of Cyprus Group is subject to a Other Systemically Important Institution (“O-SII”) Buffer of 2% of RWA
- The O-SII Buffer will be phased in by 0.5 p.p each year, starting from 1 January 2019
8% Pillar 1 Requirement of which:
• 4.5% CET1 • 1.5% AT1 • 2.0% T2
Capital Conservation Buffer (“CCB”)4
O-SII Buffer - (transitional)
Total
Pillar 2R2,3
Note: EU average
P2R = ~2%1
CET1 (%)
AT 1
TC (%)
8.0% 8.0% 8.0%
0
13.2%
1.5%
3.75% 3.0% TBD
1.25% 1.875%
2.50%
0.5% 13.00% 12.875%
14.00% 16.2%
2017 2018 2019 Q3 18 pro forma for
Helix7 and AT1 issuance8
Tier 2 (%) 1.5%
49
133
156
255
192
0
127
127
127
0
153
204
191
191
191
203
224
230
234
234
234
0
97
114
10.5%
0.5%
13.2%
c. 11.0%
CET1 Q3 18 Pro
forma for Helix3
and AT1 issuance4
Potential 2019 MDA Threshold
Buffer to MDA Restrictions Level & Distributable Items
Pro Forma3 CET1 Ratios (Post Helix)
Unfilled
AT14 + T2
capacity
221bps
[ ] bps Distance
to MDA CET1
Ratio (%)
CET1
Req
Unfilled AT14
& T2 Bucket
• Significant CET1 MDA buffer: ~221bp (~€317 mn)
• Helix sale expected to improve current CET1 ratio
by c.130bp3
(1) Distributable Items definition - The distributable items definition is being amended in the update of the banking reform package. The proposals suggest the amendment is likely to be a
neutral to positive impact for AT1 investors as the definition is being broadened.
(2) Assumes P2R remains the same as 2018
(3) Calculations assume Significant Risk Transfer benefit from Helix, which as at the date of slides has not been approved by the ECB (refer to slide 35). Calculations assume no changes
in capital or provisioning levels required as result of upcoming SREP process or otherwise. Any such changes may be materially adverse
(4) Assumes issuance of €220 mn already priced in August 2018. The issuance is conditional upon BOCH completing the reclassification of share premium to distributable
reserves, which was approved at BOCH's Annual General Meeting and requires the subsequent approval by the Irish Court pursuant to section 85(1) of the Companies
Act 2014 of Ireland. The consent of the ECB for the Capital Reduction is required before it is approved by the Irish Court
Time deposits Savings accounts Current & demand accounts
Deposits by Type (€ bn)
6.73 6.68 6.63 6.29 6.19 6.18
0.80 0.90 0.91 0.92 0.97 0.79
8.98 9.73 10.31 10.79 11.27 9.88
16.51 17.31 17.85 18.00 18.43 16.85
Dec-16 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18
Corporate SME Retail
(€ bn)
Deposits by customer Sector (€ bn) 30 September 2018 (%)
36%
5% 59%
49
133
156
255
192
0
127
127
127
0
153
204
191
191
191
203
224
230
234
234
234
0
97
114
Reduction in Overseas Non-Core Exposures
(1) Comparatives excluding core exposures
(2) Lending exposures to Greek entities in the normal course of business in Cyprus and lending exposures in Cyprus with collaterals in Greece
44 39 38 37 31 28 28 25
149
111 108 91
79 77 72
35
42
9 9
9
9 7 7
7 23
283
248 240
214
193 184
179
176
518
407 395
351
312
296 286
266
Dec 2016 Mar 2017 Jun 2017 Sep 2017 Dec 2017 Mar 2018 Jun 2018 Sep 2018
Russia: Net exposure Romania: Net exposure Serbia: Net exposure
UK: Net exposure Greece: Net exposure
62
• The Group continues its efforts for further
deleveraging and disposal of non-essential assets
and operations in Greece, Romania and Russia.
• Further to the UK sale, residual exposures of €23
mn remain in the UK as at 30 September 2018,
relating to legacy exposures. These exposures are
expected to be run down over time and are now
categorised as non-core overseas exposures.
• In accordance with the Group’s strategy to exit from
overseas non-core operations, the operations of the
branch in Romania are expected to be terminated,
subject to the completion of deregistration
formalities with respective authorities.
• As at 30 September 2018, there were €156 mn2 of
overseas exposures in Greece (€154 at 30 June
2018, €184 mn at 31 March 2018 and €168 mn at
31 December 2017) not identified as non-core
exposures.
Overseas non-core exposures (€ mn)
49
133
156
255
192
0
127
127
127
0
153
204
191
191
191
203
224
230
234
234
234
0
97
114
Appendix – Glossary & Definitions
63
49
133
156
255
192
0
127
127
127
0
153
204
191
191
191
203
224
230
234
234
234
0
97
114
Glossary & Definitions
64
Accumulated provisions Comprise: (i) provisions for impairment of customer loans and advances, (ii) the fair value adjustment on initial recognition of loans acquired from Laiki Bank and
on loans classified at FVPL, and (iii) provisions for off-balance sheet exposures disclosed on the balance sheet within other liabilities.
Advisory and other
restructuring costs
Comprise mainly: fees of external advisors in relation to: (i) disposal of operations and non-core assets, (ii) customer loan restructuring activities which are not
part of the effective interest rate and (iii) the listing on the London Stock Exchange
AIEA Average Interest Earning Assets
AT1 AT1 (Additional Tier 1) is defined in accordance with Articles 51 and 52 of the Capital Requirements Regulation (EU) No 575/2013.
Average contractual
interest rates
Interest rates on cost of deposits were previously calculated as the Interest Expense over Average Balance. The current calculation which the Bank considers
more appropriate is based on the weighted average of the contractual rate times the balance at the end of the month. The rates are calculated based on the
month end contractual interest rates. The quarterly rates are the average of the three quarter month end contractual rates
Book Value BV= book value = Carrying value prior to the sale of property
BOC UK sale
Comparatives have been represented for the results of Bank of Cyprus UK Limited (‘BOC UK’) and its subsidiary, Bank of Cyprus Financial Services Limited
(‘BOC FS’, and together the ‘UK Group’), from continuing operations to discontinued operations. The representation did not have an impact on the financial
performance of the Group for the period. The Group lost control over the UK group and as a result, it did not consolidate it on 30 September 2018. The sale of
the UK group was completed on 23 November 2018. A reference on UK sale in 3Q2108 denotes loss of control.
CET1 capital ratio
(transitional basis) CET1 capital ratio (transitional basis) is defined in accordance with the Basel II requirements
CET1 fully loaded (FL) The CET1 fully loaded (FL) ratio is defined in accordance with the Capital Requirements Regulation (EU) No 575/2013.
Cost of Funding Effective yield of cost of funding: Interest expense of all interest bearing liabilities after hedging, over average interest bearing liabilities (customer deposits,
funding from the central bank, interbank funding, subordinated liabilities). Historical information has been adjusted to take into account hedging
Contribution to SRF Relates to the contribution made to the Single Resolution Fund.
Cost of Risk Provisions for impairment of customer loans and provisions for off-balance exposures and gains/(losses) on derecognition of loans and changes in expected cash
flows divided by average gross loans. Additional provisions of c.€500 mn charged in 2Q2017 are included in the calculation of Cost of Risk but are not annualised
Cost to Income ratio Cost-to-income ratio comprises total expenses (as defined) divided by total income (as defined)
CRR DD Default Definition
Deferred Tax Asset
adjustments
The DTA adjustments relate to Deferred Tax Assets totaling €381 mn and recognised on tax losses totaling €3.05 bn and can be set off against future profits of
the Bank until 2028 at a tax rate of 12.5%. There are tax losses of c.€7.1 bn for which no deferred tax asset has been recognised. The recognition of deferred tax
assets is supported by the Bank’s business forecasts and takes into account the recoverability of the deferred tax assets within their expiry period
DFAs Debt for Asset Swaps
DFEs Debt for Equity Swaps
DTA Deferred Tax Assets
EBA European Banking Authority
49
133
156
255
192
0
127
127
127
0
153
204
191
191
191
203
224
230
234
234
234
0
97
114
Glossary & Definitions
65
ECB European Central Bank
Effective yield Interest Income on Loans/Net Loans
Effective yield of liquid
assets
Interest Income on liquids after hedging, over average liquids (Cash and balances with central banks, placements with banks and bonds). Historical information
has been adjusted to take into account hedging
Foreclosures Value of on-boarded assets is set at a conservative 25%-30% discount from open market valuations, by two independent sources; Includes consensual and non
consensual DFAs and DFEs
FTP Fund transfer pricing methodologies applied between the business lines to present their results on an arm’s length basis
GBV Gross Book Value
Gross Loans
Gross loans are reported before the fair value adjustment on initial recognition relating to loans acquired from Laiki Bank (calculated as the difference between
the outstanding contractual amount and the fair value of loans acquired) amounting to €480 mn at 30 September 2018 (compared to €514 mn at 30 June 2018
and to €668 mn at 31 December 2017). Additionally, gross loans (i) include loans and advances to customers measured at fair value through profit and loss of
€395 mn and (ii) are reported after the reclassification between gross loans and expected credit losses on loans and advances to customers classified as held for
sale of €92 mn.
Gross Sales Proceeds Proceeds before selling charge and other leakages
GVA Gross Value Added
Group The Group consists of Bank of Cyprus Holdings Public Limited Company, “BOC Holdings” or “the Company”, its subsidiary Bank of Cyprus Public Company
Limited, the “Bank” and the Bank’s subsidiaries
H/O Head Office
IB, W&M International Banking, Wealth and Markets
IBU Servicing exclusively international activity companies registered in Cyprus and abroad and not residents
LCR add on The local regulatory liquidity requirements set by the Central Bank of Cyprus (CBC) were abolished on 1 January 2018 and were replaced with a liquidity add-on
requirement imposed on top of the LCR of the Bank which became effective on 1 January 2018
Legacy Legacy relates to RRD, REMU and non-core overseas exposures
Loan Loss Provisions Please refer to Provisions charge ( as defined)
LLR (Loans Loss Reserve) Please refer to accumulated provisions (as defined)
Net Proceeds Proceeds after selling charges and other leakages
NIM
Net Interest Margin is calculated as the net interest income (annualised) divided by the average interest earning assets. Interest earning assets include: cash and
balances with central banks, plus loans and advances to banks, plus net customer loans and advances, plus investments (excluding equities and mutual funds)
and derivatives
49
133
156
255
192
0
127
127
127
0
153
204
191
191
191
203
224
230
234
234
234
0
97
114
Glossary & Definitions
66
Net fee and commission
income over total income Net fee and commission income over total income is the net fee and commission income divided by the total income (as defined)
Net loans and advances Loans and advances net of accumulated provisions (as defined)
Non-interest income
Non-interest income comprises Net fee and commission income, Net foreign exchange gains and net gains on other financial instruments and
disposal/dissolution of subsidiaries and associates, insurance income net of claims and commissions, net gains/(losses) from revaluation and disposal of
investment properties and on disposal of stock of properties, and other income
NPEs
Non-Performing Exposures (NPEs) –as per the EBA definition: According to the EBA reporting standards on forbearance and non-performing exposures (NPEs),
published on 2014 and ECB’s Guidance to Banks on Non-Performing Loans published on March 2017 a loan is considered an NPE if:
1. the debtor is assessed as unlikely to pay its credit obligations in full without the realisation of the collateral, regardless of the existence of any past due
amount or of the number of days past due
2. the exposures are impaired i.e. in cases where there is a specific provision, or
3. there are material exposures which are more than 90 days past due, or
4. there are performing forborne exposures under probation for which additional forbearance measures are extended, or
5. there are performing forborne exposures under probation that present more than 30 days past due within the probation period. The NPEs are reported
before the deduction of accumulated provisions (as defined)
The exit criteria of NPE forborne are the following:
1. The extension of forbearance measures does not lead to the recognition of impairment or default
2. One year has passed since the forbearance measures were extended
3. There is not, following the forbearance measures, any past due amount or concerns regarding the full repayment of the exposure according to the post
forbearance conditions
NPE provision coverage
ratio Accumulated impairment losses divided by gross non performing exposures
NPE ratio NPEs ratio is calculated as the NPEs as per EBA (as defined) divided by gross loans (as defined)
NSFR
Net Stable Funding Ratio (NSFR) was not introduced on 1 January 2018, as opposed to what was expected. 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 standards. Its calculation is a SREP requirement. EBA is
working on finalising the NSFR and enforcing it as a regulatory ratio
OMV Open Market Value
Operating profit Comprises profit before total provisions and impairments (as defined), share of profit from associates and joint ventures, tax, profit/(loss) attributable to non-
controlling interests, advisory and other restructuring costs-excluding the NPE sale (Helix), restructuring costs and profit/(loss) from discontinued operations
p.p percentage points
Performing Relates to all business lines excluding Restructuring and Recoveries Division (“RRD”), REMU and non-core overseas exposures
Phased-in Capital
Conservation Buffer (CCB)
In accordance with the legislation in Cyprus which has been set for all credit institutions, the applicable rate of the CCB is 1.25% for 2017, 1.875% for 2018 and
2.5% for 2019 (fully phased-in)
Provisions Charge Comprises provisions for impairments of customer loans and provisions for off-balance sheet exposures, net of gain/(loss) on derecognition of loans and
advances to customers and changes in expected cash flows
49
133
156
255
192
0
127
127
127
0
153
204
191
191
191
203
224
230
234
234
234
0
97
114
Glossary & Definitions
67
Provisions for impairment
of customer loans Provisions for impairment of customer loans and gains/(losses) on derecognition of loans and changes in expected cash flows on acquired loans.
Profit/(loss) after tax and
before restructuring costs,
discontinued operations
and NPE sale (Helix)
Excludes advisory and other restructuring costs. It also excludes profit/(loss) from discontinued operations and any restructuring costs or loss relating to the NPE
sale (Helix)
qoq Quarter on quarter change
Restructured loans Restructuring activity within quarter as recorded at each quarter end and includes restructurings of NPEs, performing loans and re-restructurings
Risk adjusted yield Interest Income on Loans net of provisions/Net Loans
RRD Restructuring and Recoveries Division
RWA Risk Weighted Assets
RWA Intensity Risk Weighted Assets over Total Assets
Special levy Relates to the special levy on deposits of credit institutions in Cyprus
Stage 2 & Stage 3 Loans Include purchased or originated credit-impaired
Tangible Collateral Restricted to Gross IFRS balance
Total Capital ratio Total capital ratio is defined in accordance with the Capital Requirements Regulation (EU) No 575/2013
Total expenses Total expenses comprise staff costs, other operating expenses and the special levy and contribution to the Single Resolution Fund. It does not include “advisory
and other restructuring costs-excluding discontinued operations and Helix” or any restructuring costs or loss relating to Project Helix
Total income Total income comprises net interest income and non-interest income (as defined)
Total provisions and
impairments
Total provisions and impairments comprise provision charge (as defined), plus (provisions)/reversal of litigation and regulatory matters plus (impairments)/reversal
of other financial and non-financial assets
T2 Tier 2 Capital
Underlying basis Statutory basis adjusted for certain items as detailed in the Basis of Presentation
Write offs and non
contractual write offs
Loans together with the associated provisions are written off when there is no realistic prospect of future recovery. Partial write-offs, including non-contractual
write-offs, may occur when it is considered that there is no realistic prospect for the recovery of the contractual cash flows. In addition, write-offs may reflect
restructuring activity with customers and are part of the terms of the agreement and subject to satisfactory performance
yoy Year on year change
49
133
156
255
192
0
127
127
127
0
153
204
191
191
191
203
224
230
234
234
234
0
97
114
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. These forward-looking statements include, but are not
limited to, statements relating to the Group’s intentions, beliefs or current expectations and projections about the Group’s
