TIDMBOCH
RNS Number : 9300T
Bank of Cyprus Holdings PLC
30 March 2021
Announcement
Group Financial Results for the year ended 31 December 2020
Nicosia, 30 March 2021
Key Highlights for the year ended 31 December 2020
Achievements in 2020
Successful navigation through the pandemic with clear priorities
* Protection of staff and customer health, while
ensuring operational resilience of the Bank
* c.EUR1.4 bn new lending to support the recovery of
the Cypriot economy
* Payment holidays until end of 2020 to >25,000
customers (EUR5.9 bn)
Significant progress on balance sheet de-risking despite challenging
environment
* EUR2.1 bn NPE reduction, pro forma for NPE sales;
EUR1.5 bn NPE sales and EUR0.6 bn organic
* Gross NPE ratio reduced to 16% (7% net) and NPE
coverage increased to 59%, both pro forma for NPE
sales
* RWA intensity reduced to 53%, pro forma for NPE sales
Asset quality management throughout the pandemic
* Provision of support to impacted customers to
alleviate short term cash flow burden
* Close monitoring of loans in moratoria
* Encouraging performance since the end of moratorium
(31 December 2020); EUR3.8 bn of performing loans had
an instalment due by 19 March 2021, and 96% of those
resumed payments
Careful cost management
* Total operating expenses (excl. special levy and
contributions to SRF and DGF) in FY2020 down 12% yoy
* Cost to income ratio (excl. special levy and
contributions to SRF and DGF) at 60% for FY2020,
broadly flat yoy
* Digitally engaged customers increased to 75%, up 6
p.p. yoy
Launch of New Strategic Plan and Medium Term Targets
* Single digit NPE ratio by the end of 2022
* Return on Tangible Equity (ROTE) of c.7%
Key Highlights for the quarter ended 31 December 2020
Positive Organic Performance in 4Q2020
* New lending of EUR 374 mn in 4Q2020, up 30% qoq,
reflecting early recovery post 1H2020 lockdown
* Total income of EUR1 42 mn up 3% qoq; Operating
profit of EUR 45 mn
* Cost of risk of 99 bps
* Organic profit after tax of EUR2 mn
* Exceptional items of EUR51 mn, including provisions /
net loss relating to NPE sales (incl. restructuring
expenses) of EUR42 mn
* Loss after tax of EUR49 mn for 4Q2020 and EUR 171 mn
for FY2020, post exceptional items
Operating Efficiency
* Total operating expenses (excluding special levy and
contributions to SRF and DGF) of EUR 91 mn for 4Q2020
, up 7% qoq
* Cost to income ratio (excluding special levy and
contributions to SRF and DGF) at 64% for 4Q2020
Good Capital, Strong Liquidity
* CET1 ratio of 15.2% and Total Capital ratio of 18.7%,
on a transitional basis and pro forma for NPE sales
* Deposits at EUR16.5 bn, broadly flat yoy and qoq
* Significant surplus liquidity of EUR4.2 bn (LCR at
254%)
Significant Progress in Balance Sheet Repair
* EUR0.5 bn NPE sale (Helix 2 Portfolio B) signed in
January 2021; EUR1.5 bn NPE sales since December 2019
* NPEs reduced by EUR 2 .1 bn to EUR 1.8 bn (EUR0.7 bn
net) in FY2020, pro forma for NPE sales
* Gross NPE ratio reduced to 16% (7% net) and coverage
maintained at 59% , pro forma for NPE sales
A . Group Financial Results - Statutory Basis
Audited Consolidated Income Statement for the year ended 31
December 2020
2020 2019
EUR000 EUR000
---------- ----------
765 ,
Turnover 095 910,576
========== ==========
389 ,
Interest income 179 454,997
Income similar to interest income 47 , 530 53,180
( 61 , ( 93,493
Interest expense 991 ) )
---------- ----------
( 44 , ( 48,708
Expense similar to interest expense 720 ) )
---------- ----------
Net interest income 329,998 365,976
---------- ----------
1 5 1,
Fee and commission income 091 171,715
---------- ----------
( 6 , ( 9 , 821
Fee and commission expense 417 ) )
---------- ----------
1 6 ,
Net foreign exchange gains 535 26 , 596
---------- ----------
Net gains on financial instrument transactions
and disposal/dissolution of subsidiaries and associates 1 , 721 18,675
---------- ----------
Insurance income net of claims and commissions 56,063 57,660
---------- ----------
Net (losses)/gains from revaluation and disposal
of investment properties (1,499) 2,249
---------- ----------
Net gains on disposal of stock of property 8,189 25,952
---------- ----------
Other income 14,957 28,938
---------- ----------
570,638 687,940
---------- ----------
( 306,713
Staff costs (201,052) )
---------- ----------
Special levy on deposits on credit institutions
in Cyprus, contribution to Single Resolution Fund ( 43,609
and other levies (33,656) )
---------- ----------
( 242,622
Other operating expenses (188,560) )
---------- ----------
147,370 94,996
---------- ----------
Net gains on derecognition of financial assets
measured at amortised cost 2,949 8,187
---------- ----------
Credit losses to cover credit risk on loans and ( 2 75 ( 232,451
advances to customers , 080) )
========== ==========
( 4,790
Credit losses of other financial instruments (4,585) )
========== ==========
( 26,081
Impairment net of reversals of non-financial assets (37,586) )
========== ==========
Loss before share of profit from associates and
remeasurement (166,932) (160,139)
---------- ----------
Remeasurement of investment in associate upon ( 25 ,
classification as held for sale - 943 )
---------- ----------
Share of profit from associates 69 5 , 513
---------- ----------
Loss before tax (166,863) (180,569)
---------- ----------
Income tax (7,920) 112,831
---------- ----------
Loss after tax for the year (174,783) (67,738)
========== ==========
Attributable to:
---------- ----------
Owners of the Company (171,532) (70,275)
---------- ----------
Non-controlling interest (3,251) 2, 537
---------- ----------
Loss for the year (174,783) (67,738)
========== ==========
Basic and diluted loss per share attributable
to the owners of the Company
(EUR cent) (38.5) (15.8)
========== ==========
A. Group Financial Results - Statutory Basis (continued)
Audited Consolidated Balance Sheet as at 31 December 2020
2020 2019
Assets EUR000 EUR000
----------- -----------
Cash and balances with central banks 5,653,315 5,060,042
----------- -----------
Loans and advances to banks 402,784 320,881
----------- -----------
Derivative financial assets 24,627 23,060
----------- -----------
Investments 1,876,009 1,682,869
----------- -----------
Investments pledged as collateral 37,105 222,961
----------- -----------
Loans and advances to customers 9,886,047 10,721,841
----------- -----------
Life insurance business assets attributable to
policyholders 474,187 458,852
----------- -----------
Prepayments, accrued income and other assets 249,877 243,930
----------- -----------
Stock of property 1,349,609 1,377,453
----------- -----------
Deferred tax assets 341,360 379,126
----------- -----------
Investment properties 128,088 136,197
----------- -----------
Property and equipment 272,474 288,054
----------- -----------
Intangible assets 185,256 178,946
----------- -----------
Investments in associates and joint venture 2,462 2,393
----------- -----------
Non-current assets and disposal groups held for
sale 630,931 26,217
----------- -----------
Total assets 21,514,131 21,122,822
=========== ===========
Liabilities
----------- -----------
Deposits by banks 391,949 533,404
----------- -----------
Funding from central banks 994,694 -
----------- -----------
Repurchase agreements - 168,129
----------- -----------
Derivative financial liabilities 45,978 50,593
----------- -----------
Customer deposits 16,533,212 16,691,531
----------- -----------
Insurance liabilities 671,603 640,013
----------- -----------
Accruals, deferred income, other liabilities
and other provisions 359,892 324,246
----------- -----------
Pending litigation, claims, regulatory and other
matters 123,615 108,094
----------- -----------
Subordinated loan stock 272,152 272,170
----------- -----------
Deferred tax liabilities 45,982 46,015
----------- -----------
Total liabilities 19,439,077 18,834,195
----------- -----------
Equity
----------- -----------
Share capital 44,620 44,620
----------- -----------
Share premium 594,358 1,294,358
----------- -----------
Revaluation and other reserves 209,153 210,701
----------- -----------
Retained earnings 982,513 490,286
----------- -----------
Equity attributable to the owners of the Company 1,830,644 2,039,965
----------- -----------
Other equity instruments 220,000 220,000
----------- -----------
Total equity excluding non--controlling interests 2,050,644 2,259,965
----------- -----------
Non--controlling interests 24,410 28,662
----------- -----------
Total equity 2,075,054 2,288,627
----------- -----------
Total liabilities and equity 21,514,131 21,122,822
=========== ===========
B. Group Financial Results - Underlying Basis
Unaudited Consolidated Income Statement
--------------------------------------------------------------------------------------------------------
(4q vs (FY)
EUR mn FY2020 FY2019(1) 4Q2020 3Q2020 2Q2020 1Q2020 3q) +% Yoy +%
-------------------------------- --------- --------- ------ ------ ------ ------ ------- -------
Net interest income 330 344 80 82 83 85 -2% -4%
Net fee and commission
income 144 150 38 35 33 38 8% -4%
Net foreign exchange
gains and net gains
on financial instrument
transactions and
disposal/dissolution
of subsidiaries and
associates 15 38 1 2 6 6 -62% -62%
Insurance income
net of claims and
commissions 56 58 14 13 18 11 14% -3%
Net gains/(losses)
from revaluation
and disposal of investment
properties and on
disposal of stock
of properties 7 32 5 2 (1) 1 96% -79%
Other income 15 29 4 3 4 4 22% -48%
-------------------------------- --------- --------- ------ ------ ------ ------ ------- -------
Total income 567 651 142 137 143 145 3% -13%
-------------------------------- --------- --------- ------ ------ ------ ------ ------- -------
Staff costs (195) (220) (50) (49) (47) (49) 1% -11%
Other operating expenses (145) (165) (41) (35) (34) (35) 16% -12%
Special levy and
contributions to
Single Resolution
Fund (SRF) and Deposit
Guarantee Fund (DGF) (30) (25) (6) (9) (6) (9) -29% 22%
Total expenses (370) (410) (97) (93) (87) (93) 4% -10%
--------- --------- ------ ------ ------ ------ -------
Operating profit 197 241 45 44 56 52 2% -18%
-------------------------------- --------- --------- ------ ------ ------ ------ ------- -------
Loan credit losses (149) (146) (31) (31) (23) (64) 1% 2%
Impairments of other
financial and non-financial
assets (42) (22) (6) (7) (25) (4) -6% 86%
Provisions for litigation,
claims, regulatory
and other matters (7) (10) (3) 0 (2) (2) - -31%
-------------------------------- --------- --------- ------ ------ ------ ------ ------- -------
Total loan credit
losses, impairments
and provisions (198) (178) (40) (38) (50) (70) 6% 11%
-------------------------------- --------- --------- ------ ------ ------ ------ ------- -------
(Loss)/profit before
tax and non-recurring
items (1) 63 5 6 6 (18) -21% -
-------------------------------- --------- --------- ------ ------ ------ ------ ------- -------
Tax (8) (3) (1) (2) (3) (2) -23% -
(Loss)/profit attributable
to non-controlling
interests 3 (2) (1) 0 4 (0) - -
(Loss)/profit after
tax and before non-recurring
items (attributable
to the owners of
the Company) (6) 58 3 4 7 (20) -32% -
--------- --------- ------ ------ ------ ------ -------
Advisory and other
restructuring costs
- organic (10) (22) (1) (3) (3) (3) -68% -52%
-------------------------------- --------- --------- ------ ------ ------ ------ ------- -------
(Loss)/profit after
tax - organic (attributable
to the owners of
the Company) (16) 36 2 1 4 (23) 72% -
-------------------------------- --------- --------- ------ ------ ------ ------ ------- -------
Provisions/net loss
relating to NPE sales,
including restructuring
expenses(2) (146) (92) (42) 3 (104) (3) - 58%
Restructuring costs
- Voluntary Staff
Exit Plan (VEP) (6) (81) (6) - - - - -
(DTC levy)/reversal
of impairment of
DTA and impairment
of other tax receivables (3) 88 (3) - - - - -
Loss on r emeasurement
of investment in
associate upon classification
as held for sale
(CNP) net of share
of profit from associates - (21) - - - - - -
(Loss)/profit after
tax (attributable
to the owners of
the Company) (171) (70) (49) 4 (100) (26) - 144%
--------- --------- ------ ------ ------ ------ -------
B. Group Financial Results - Underlying Basis (continued)
Unaudited Consolidated Income Statement - Key Performance Ratios
-----------------------------------------------------------------------------------------------------
(4q vs (FY)
Key Performance Ratios(3) FY2020 FY2019(1) 4Q2020 3Q2020 2Q2020 1Q2020 3q) +% Yoy +%
-------------------------- -------- --------- ------- ------ ------- ------ ------- ---------
Net Interest Margin
(annualised) 1.84% 1.90% 1.75% 1.79% 1.88% 1.95% -4 bps -6 bps
-------------------------- -------- --------- ------- ------ ------- ------ ------- ---------
Cost to income ratio 65% 63% 69% 68% 61% 64% +1 p.p. +2 p.p.
-------------------------- -------- --------- ------- ------ ------- ------ ------- ---------
Cost to income ratio
excluding special
levy and contributions
to SRF and DGF 60% 59% 64% 62% 57% 58% +2 p.p. +1 p.p.
-------------------------- -------- --------- ------- ------ ------- ------ ------- ---------
Operating profit return
on average assets
(annualised) 0.9% 1.1% 0.8% 0.8% 1.1% 1.0% - -0.2 p.p.
-------------------------- -------- --------- ------- ------ ------- ------ ------- ---------
Basic (losses)/earnings
per share attributable
to the owners of the
Company - organic
(EUR cent) (3.66) 7.97 0.42 0.24 0.82 (5.14) 0.18 (11.63)
-------------------------- -------- --------- ------- ------ ------- ------ ------- ---------
Basic (losses)/earnings
per share attributable
to the owners of the
Company (EUR cent) (38.45) (15.75) (11.20) 0.91 (22.35) (5.81) (12.11) (22.70)
-------------------------- -------- --------- ------- ------ ------- ------ ------- ---------
1. The interest income, non-interest income, staff costs, other operating
expenses and loan credit losses relating to Project Helix are disclosed
under 'Provisions/net loss relating to NPE sales, including restructuring
expenses' in the underlying basis, in order to separate out the impact of
this non-recurring transaction. 2. 'Provisions/net (loss)/profit relating
to NPE sales, including restructuring expenses' refer to the net loss on
transactions completed during each year/period, net loan credit losses on
transactions under consideration, as well as the restructuring costs relating
to these trades. For further details please refer to Section B.3.4. 3. Including
the NPE portfolios classified as "Non-current assets and disposal groups
held for sale". p.p. = percentage points, bps = basis points, 100 basis
points (bps) = 1 percentage point
Commentary on Underlying Basis
The financial information presented in this Section provides an
overview of the Group financial results for the year ended 31
December 2020 on the 'underlying basis' which the management
believes best fits the true measurement of the performance and
position of the Group, as this presents separately the exceptional
and the one off items.
Reconciliations between the statutory basis and the underlying
basis are included in section B.1 'Unaudited reconciliation of the
Income Statement for the year ended 31 December 2020 between
statutory basis and underlying basis' below and will also be
available in the Annual Financial Report for the year ended 31
December 2020 under 'Definitions and Explanations on Alternative
Performance Measures Disclosures', to facilitate the comparability
of the underlying basis to the statutory information.
With respect to the 'Balance Sheet Analysis', please note the
following in relation to the disclosure of pro forma figures and
ratios with respect to Project Helix 2 (as explained in the
paragraph below). All relevant figures are based on 31 December
2020 financial results, unless otherwise stated. Numbers on a pro
forma basis are based on the 31 December 2020 underlying basis
figures and are adjusted for Project Helix 2, and assume its
completion, which remains subject to required customary regulatory
and other approvals. Where numbers are provided on a pro forma
basis this is stated.
Project Helix 2 refers to the agreement the Group reached in
August 2020 with funds affiliated with Pacific Investment
Management Company LLC ("PIMCO"), for the sale of a portfolio of
loans with gross book value of EUR0.9 bn (Helix 2 Portfolio A), as
well as to the agreement the Group reached with PIMCO in January
2021 for the sale of an additional portfolio of loans with gross
book value of EUR0.5 bn (Helix 2 Portfolio B). Further details are
provided in Section B.2.5 'Loan portfolio quality'.
B. Group Financial Results - Underlying Basis (continued)
Unaudited Consolidated Balance Sheet
============================================================================================================
EUR mn 31.12.2020 31.12.2019 + %
============================================= =============== ================== ========================
Cash and balances with central
banks 5,653 5,060 12%
Loans and advances to banks 403 321 26%
Debt securities, treasury bills
and equity investments 1,913 1,906 0%
Net loans and advances to customers 9,886 10,722 -8%
Stock of property 1,350 1,378 -2%
Investment properties 128 136 -6%
Other assets 1,550 1,574 -2%
Non-current assets and disposal
groups held for sale 631 26 -
============================================= =============== ================== ========================
Total assets 21,514 21,123 2%
============================================= =============== ================== ========================
Deposits by banks 392 533 -27%
Funding from central banks 995 - -
Repurchase agreements - 168 -100%
Customer deposits 16,533 16,692 -1%
Subordinated loan stock 272 272 0%
Other liabilities 1,247 1,169 7%
============================================= =============== ================== ========================
Total liabilities 19,439 18,834 3%
============================================= =============== ================== ========================
Shareholders' equity 1,831 2,040 -10%
============================================= =============== ================== ========================
Other equity instruments 220 220 -
============================================= =============== ================== ========================
Total equity excluding non-controlling
interests 2,051 2,260 -9%
============================================= =============== ================== ========================
Non-controlling interests 24 29 -15%
============================================= =============== ================== ========================
Total equity 2,075 2,289 -9%
============================================= =============== ================== ========================
Total liabilities and equity 21,514 21,123 2%
============================================= =============== ================== ========================
Key Balance Sheet figures and 31.12.2020
ratios (proforma)(1) 31.12.2020 +(2)
(as reported)(2) 31.12.2019
============================================= =============== ================== ============ ==========
Gross loans (EUR mn) 10,907 12,261 12,822 -4%
============================================= =============== ================== ============ ==========
Allowance for expected loan
credit losses (EUR mn) 1,033 1,902 2,096 -9%
============================================= =============== ================== ============ ==========
Customer deposits (EUR mn) 16,533 16,533 16,692 -1%
============================================= =============== ================== ============ ==========
Loans to deposits ratio (net) 60% 63% 64% -1 p.p.
============================================= =============== ================== ============ ==========
NPE ratio 16% 25% 30% -5 p.p.
============================================= =============== ================== ============ ==========
NPE coverage ratio 59% 62% 54% +8 p.p.
============================================= =============== ================== ============ ==========
Leverage ratio 8.8% 8.8% 10.0% -0.5 p.p.
============================================= =============== ================== ============ ==========
Capital ratios and risk weighted 31.12.2020
assets (proforma)(1) 31.12.2020 31.12.2019 +(2)
(as reported)(2)
============================================= =============== ================== ============ ==========
Common Equity Tier 1 (CET1)
ratio (transitional for IFRS
9)(3) 15.2% 14.8% 14.8% -
============================================= =============== ================== ============ ==========
Total capital ratio 18.7% 18.4% 18.0% +40 bps
============================================= =============== ================== ============ ==========
Risk weighted assets (EUR mn) 11,381 11,636 12,890 -10%
============================================= =============== ================== ============ ==========
1. Pro forma for the sale of NPEs (Project Helix 2, Portfolios A and
B) of EUR1.3 bn on the basis of 31 December 2020 figures; calculations
on a pro forma basis assume completion of Project Helix 2 (Portfolios
A and B), which remains subject to required customary regulatory and
other approvals. 2. As reported: Including the NPE portfolios classified
as "Non-current assets and disposal groups held for sale". 3.The CET1
fully loaded ratio as at 31 December 2020 amounts to 12.9% and 13.3%
pro forma for Helix 2 (Portfolios A and B) (compared to 12.8% and
12.9% pro forma for Helix 2 Portfolio A as at 30 September 2020 and
13.1% as at 31 December 2019). p.p. = percentage points, bps = basis
points, 100 basis points (bps) = 1 p.p.
B. Group Financial Results - Underlying Basis (continued)
B .1 Unaudited reconciliation of the Income Statement for the
year ended 31 December 2020 between statutory basis and underlying
basis
EUR mn Underlying NPE Tax related Other Statutory
basis Sales items basis
Net interest income 330 - - - 330
=========== ======= ============ ====== ==========
Net fee and commission income 144 - - - 144
=========== ======= ============ ====== ==========
Net foreign exchange gains and net
gains on financial instrument transactions
and disposal/dissolution of subsidiaries 15 - - 3 18
=========== ======= ============ ====== ==========
Insurance income net of claims and
commissions 56 - - - 56
=========== ======= ============ ====== ==========
Net gains from revaluation and disposal
of investment properties and on disposal
of stock of properties 7 - - - 7
=========== ======= ============ ====== ==========
Other income 15 - - - 15
----------- ------- ------------ ------ ----------
Total income 567 - - 3 570
=========== ======= ============ ====== ==========
Total expenses (370) (26) (3) (23) (422)
----------- ------- ------------ ------ ----------
Operating profit 197 (26) (3) (20) 148
=========== ======= ============ ====== ==========
Loan credit losses (149) (120) - (3) (272)
=========== ======= ============ ====== ==========
Impairments of other financial and
non-financial assets (42) - - - (42)
=========== ======= ============ ====== ==========
Provisions for litigation, claims,
regulatory and other matters (7) - - 7 -
=========== ======= ============ ====== ==========
Loss before tax and non-recurring items (1) (146) (3) (16) (166)
=========== ======= ============ ====== ==========
Tax (8) - - - (8)
=========== ======= ============ ====== ==========
Loss attributable to non-controlling
interests 3 - - - 3
----------- ------- ------------ ------ ----------
Loss after tax and before non-recurring
items (attributable to the owners of
the Company) (6) (146) (3) (16) (171)
=========== ======= ============ ====== ==========
Advisory and other restructuring costs-organic (10) - - 10 -
----------- ------- ------------ ------ ----------
Loss after tax - organic* (attributable
to the owners of the Company) (16) (146) (3) (6) (171)
=========== ======= ============ ====== ==========
Provisions/net loss relating to NPE
sales, including restructuring expenses (146) 146 - - -
=========== ======= ============ ====== ==========
Restructuring costs - Voluntary Staff
Exit Plan (VEP) (6) - - 6 -
=========== ======= ============ ====== ==========
DTC levy (3) - 3 - -
=========== ======= ============ ====== ==========
Loss after tax (attributable to the
owners of the Company) (171) - - - (171)
=========== ======= ============ ====== ==========
*This is the loss after tax (attributable to the owners of the
Company), before the provisions/net loss relating to NPE sales,
including restructuring expenses, as well as before the
restructuring costs relating to the voluntary staff exit plan (VEP)
and the DTC levy.
The reclassification differences between the statutory basis and
the underlying basis mainly relate to the impact from
'non-recurring items' and are explained as follows:
NPE sales
* Total expenses include restructuring costs of EUR5 mn
and operating expenses of EUR21 mn mainly relating to
the agreements for the sale of portfolios of NPEs and
are presented within 'Provisions/net loss relating to
NPE sales, including restructuring expenses' under
the underlying basis.
* Loan credit losses under the statutory basis include
the loan credit losses relating to Project Helix 2 of
EUR99 mn recorded upon the closing of the transaction
for each portfolio, as well as additional loan credit
losses of EUR21 mn recorded in 2Q2020 within the
context of IFRS 9, as a result of potential further
NPE sales anticipated at the time; these are
disclosed under non-recurring items within
'Provisions/net loss relating to NPE sales, including
restructuring expenses' under the underlying basis.
B. Group Financial Results - Underlying Basis (continued)
B .1 Unaudited reconciliation of the Income Statement for the
year ended 31 December 2020 between statutory basis and underlying
basis (continued)
Tax related items
* Levy in the form of a guarantee fee relating to the
revised income tax legislation of EUR3 mn, which has
been disclosed within 'DTC levy' under the underlying
basis, is disclosed within 'Special levy on deposits
on credit institutions in Cyprus, contribution to
Single Resolution Fund and other levies' under the
statutory basis.
Other reclassifications
* Advisory and other restructuring costs of
approximately EUR10 mn included in 'Other operating
expenses' under the statutory basis are separately
presented under the underlying basis since they
represent one-off items.
* Provisions for litigation, claims, regulatory and
other matters amounting to EUR7 mn included in 'Other
operating expenses' under the statutory basis, are
separately presented under the underlying basis,
since they mainly relate to cases that arose outside
the normal activities of the Group.
* Restructuring costs relating to voluntary staff exit
plan (VEP) amounting to EUR6 mn and included within
'Staff costs' under the statutory basis, are
separately presented under the underlying basis,
since they represent one-off items.
* Net gains on loans and advances to customers at FVPL
of c.EUR3.5 mn included in 'Loan credit losses' under
the underlying basis are included in 'Net gains on
financial instrument transactions and
disposal/dissolution of subsidiaries and associates'
under the statutory basis. Their classification under
the underlying basis is done in order to align them
to the net losses on loans and advances to customers
at amortised cost.
B.2. Balance Sheet Analysis
B.2.1 Capital Base
Total equity excluding non-controlling interests totalled
EUR2,051 mn at 31 December 2020, compared to EUR2,106 mn at 30
September 2020 and EUR2,260 mn at 31 December 2019. Shareholders'
equity totalled EUR1,831 mn at 31 December 2020, compared to
EUR1,886 mn at 30 September 2020 and EUR2,040 mn at 31 December
2019.
The Common Equity Tier 1 capital (CET1) ratio on a transitional
basis stood at 14.8% at 31 December 2020 and 15.2% pro forma for
the Project Helix 2 (Portfolios A and B) sale agreements reached in
3Q2020 and 1Q2021 respectively (referred to as "pro forma for Helix
2"), compared to 14.6% at 30 September 2020 (and 14.7% pro forma
for the Project Helix 2 Portfolio A sale agreement signed in 3Q2020
(referred to as "pro forma for Helix 2A")) and to 14.8% at 31
December 2019. During 4Q2020, the CET1 ratio was positively
impacted by the amendments to the capital regulations introduced in
June 2020 in response to COVID-19 by c.23 bps (net positive
impact). The main driver behind this increase has been the
introduction of the prudential treatment of software assets in
December 2020 which had a positive impact of 18 bps during the
quarter, while amendments to the IFRS 9 dynamic component
introduced since June 2020, contributed an additional 10 bps to
CET1 in 4Q2020.
The Group has elected to apply the EU transitional arrangements
for regulatory capital purposes (EU Regulation 2017/2395) where the
impact on the impairment amount from the initial application of
IFRS 9 on the capital ratios is phased-in gradually. The amount
added each year decreases based on a weighting factor until the
impact of IFRS 9 is fully absorbed back to CET1 at the end of the
five years. The impact on the capital position for year 2018 was 5%
of the impact on the impairment amounts from the initial
application of IFRS 9, which increased to 15% (cumulative) for year
2019, 30% (cumulative) for year 2020 and 50% (cumulative) for year
2021. This will increase to 75% (cumulative) for year 2022 and will
be fully phased in (100%) by 1 January 2023. The CET1 ratio on a
transitional basis of the Group stood at 14.3% on 1 January 2021
and 14.7% pro forma for Helix 2.
In June 2020, Regulation (EU) 2020/873, regarding certain
adjustments in response to the COVID-19 pandemic, came into force,
extending the IFRS 9 transitional arrangements and introducing
further relief measures to CET1, such as allowing to temporarily
add back unrealised gains or losses on certain financial
instruments measured at fair value through other comprehensive
income. Further details are set out further below under
'Implications on capital from the Outbreak of COVID-19'.
The CET1 ratio on a fully loaded basis amounted to 12.9% as at
31 December 2020 and 13.3% pro forma for Helix 2, compared to 12.8%
as at 30 September 2020 (and 12.9% pro forma for Helix 2A) and to
13.1% as at 31 December 2019. On a transitional basis and on a
fully phased-in basis, after the transition period is completed,
the impact of IFRS 9 is expected to be manageable and within the
Group's capital plans.
The Total Capital ratio stood at 18.4% as at 31 December 2020
and 18.7% pro forma for Helix 2, compared to 18.1% as at 30
September 2020 (and 18.2% pro forma for Helix 2A) and to 18.0% as
at 31 December 2019.
The Group's capital ratios are above the Supervisory Review and
Evaluation Process (SREP) requirements.
In the context of the European Central Bank's (ECB's) capital
easing measures for COVID-19, in April 2020, the Bank received an
amendment to the December 2019 SREP decision effective as of 12
March 2020, reducing the Group's minimum phased-in Common Equity
Tier 1 (CET1) capital ratio to 9.7% (comprising a 4.5% Pillar I
requirement, a 1.7% Pillar II requirement, the Capital Conservation
Buffer of 2.5% and the Other Systemically Important Institution
Buffer of 1.0%), following the frontloading of the new rules on the
Pillar II Requirement composition, to allow banks to use Additional
Tier 1 (AT1) capital and Tier 2 (T2) capital to meet Pillar II
Requirements and not only by CET1, initially scheduled to come into
effect in January 2021.
The SREP Total Capital Requirement remained unchanged at 14.5%,
comprising an 8.0% Pillar I requirement (of which up to 1.5% can be
in the form of AT1 capital and up to 2.0% in the form of T2
capital), a 3.0% Pillar II requirement, the Capital Conservation
Buffer of 2.5% and the Other Systemically Important Institution
Buffer of 1.0%. The ECB has also provided non-public guidance for
an additional Pillar II CET1 buffer. Pillar II add-on capital
requirements derive from the context of the SREP, which is a point
in time assessment, and are therefore subject to change over
time.
In November 2020, the Group received communication from the ECB
according to which no SREP decision will be issued for the 2020
SREP cycle and that the 2019 SREP decision will remain in force,
hence leaving the Group's capital requirements unchanged, as well
as other requirements established by the 2019 SREP decision (as
amended in April 2020). The communication follows a relevant
announcement by the ECB earlier in the year that the ECB will be
taking a pragmatic approach towards the SREP for the 2020
cycle.
In accordance with the provisions of the Macroprudential
Oversight of Institutions Law of 2015, the Central Bank of Cyprus
(CBC) is the responsible authority for the designation of banks
that are Other Systemically Important Institutions (O-SIIs) and for
the setting of the O-SII buffer requirement for these systemically
important banks. The Group has been designated as an O-SII and the
O-SII buffer currently set by the CBC for the Group is 2%. This
buffer is being phased-in gradually, having started from 1 January
2019 at 0.5% and increasing by 0.5% every year thereafter, until
being fully implemented (2.0%). In April 2020, the CBC decided to
delay the phasing-in (0.5%) of the O-SII buffer on 1 January 2021
and 1 January 2022 by 12 months. Consequently, the O-SII buffer
will be fully phased-in on 1 January 2023, instead of 1 January
2022 as originally set.
Further analysis on the recent developments on the regulatory
capital ratios due to the COVID-19 outbreak is set out further
below under 'Implications on capital from the Outbreak of
COVID-19'.
The European Banking Authority (EBA) final guidelines on SREP
and supervisory stress testing and the Single Supervisory
Mechanism's (SSM) 2018 SREP methodology provide that own funds held
for the purposes of Pillar II Guidance cannot be used to meet any
other capital requirements (Pillar I, Pillar II requirements or the
combined buffer requirement), and therefore cannot be used twice.
Following the 2019 SREP decision, the new provisions became
effective as of 1 January 2020.
Based on the SREP decisions of prior years, the Company (Bank of
Cyprus Holdings PLC) and the Bank were under a regulatory
prohibition for equity dividend distribution and therefore no
dividends were declared or paid during 2019. Following the 2020
SREP communication, the Company and the Bank are still under equity
dividend distribution prohibition as the 2019 SREP decision remains
in force. This prohibition does not apply if the distribution is
made via the issuance of new ordinary shares to the shareholders,
which are eligible as CET1 capital. No prohibition applies to the
payment of coupons on any AT1 capital instruments issued by the
Company or the Bank.
The ECB, as part of its supervisory role, has completed an
onsite inspection and review on the value of the Group's foreclosed
assets with reference date 30 June 2019. The findings relate to a
prudential charge of up to 46 bps, the majority of which is
expected to be taken at 30 June 2021, depending on the Bank's
progress in disposing the properties impacted by the prudential
charge.
Share premium reduction
Bank
The Bank, having obtained approval by its shareholders, the ECB
and the Court of Cyprus, implemented a capital reduction process in
October 2020, which resulted in the reclassification of c.EUR619 mn
of the Bank's share premium balance as distributable reserves. Such
reduction of capital did not have any impact on regulatory capital
or the total equity position of the Bank or the Group.
The distributable reserves provide the basis for the calculation
of distributable items under the Capital Requirements Regulation
(EU) No. 575/2013 ( CRR), which provides that coupons on AT1
capital instruments may only be funded from distributable
items.
Company
The Company, following relevant resolution of its shareholders
at the May 2020 AGM and subsequent approval by the ECB and the
Irish High Court, implemented a capital reduction process in
November 2020, which resulted in the reclassification of EUR700 mn
of the Company's share premium balance as distributable reserves.
Such reduction of capital did not have any impact on regulatory
capital or the total equity position of the Company, the Bank or
the Group.
The distributable reserves provide the basis for the calculation
of distributable items under the CRR, which provides that coupons
on AT1 capital instruments may only be funded from distributable
items.
Project Helix 2
In August 2020, the Group signed an agreement (the 'agreement')
for the sale of a portfolio of loans with gross book value of
EUR0.9 bn as at 30 June 2020, known as Project 'Helix 2 Portfolio
A'. Loan credit losses in relation to the agreement of c.EUR68 mn,
including transaction costs were recognised during 2Q2020.
In January 2021, the Group amended and restated the agreement to
incorporate the sale of an additional portfolio of loans with gross
book value of EUR0.5 bn as at 30 September 2020, known as Project
'Helix 2 Portfolio B'. As at the year--end, in anticipation of the
agreement for Project 'Helix 2 Portfolio B' loan credit losses of
c.EUR27 mn were recognised in 4Q2020.
The completion of Helix 2 Portfolio B will be aligned with the
completion of Helix 2 Portfolio A and is currently estimated to
occur early in 2H2021. The completion remains subject to a number
of conditions, including required customary regulatory and other
approvals.
The expected capital impact of Project Helix 2 (Portfolios A and
B) at completion, and including the losses already recognised in
2Q2020 and 4Q2020, is a negative impact of 42 bps on the Group's
CET1 ratio. The expected overall capital impact of Project Helix 2
(Portfolios A and B), upon the full payment of the deferred
considerations and without taking into consideration any positive
impact from the earnout, is a positive impact of 24 bps on the
Group's CET1 ratio.
Further details regarding the consideration, including the
deferred component and earnout, are provided in Section B.2.5 'Loan
portfolio quality'.
Legislative amendments for the conversion of DTA to DTC
Legislative amendments allowing for the conversion of specific
deferred tax assets (DTA) into deferred tax credits (DTC) became
effective in March 2019. The law amendments cover the utilisation
of income tax losses transferred from Laiki Bank to the Bank in
March 2013. The introduction of CRD IV in January 2014 and its
subsequent phasing-in led to a more capital-intensive treatment of
this DTA for the Bank. The law amendments resulted in an improved
regulatory capital treatment, under CRR , of the DTA amounting to
c.EUR285 mn or a CET1 uplift of c.190 bps in March 2019.
The Group understands that, in response to concerns raised by
the European Commission with regard to the provision of state aid
arising out of the treatment of such tax losses, the Cyprus
Government is considering the adoption of modifications to the Law,
including requirements for an additional annual fee over and above
the 1.5% annual guarantee fee already acknowledged, to maintain the
conversion of such DTAs into tax credits.
The Group, in anticipation of modifications in the Law,
acknowledges that such increased annual fee may be required to be
recorded on an annual basis until expiration of such losses in
2028. The determination and conditions of such amount will be
prescribed in the Law to be amended and the amount determined by
the Government on an annual basis. Amendments to the Law will need
to be adopted by the Cyprus Parliament and published in the
Official Gazette of the Republic for the amendments to be
effective. The Group, however, understands that contemplated
amendments to the Law may provide that the minimum fee to be
charged will be 1.5% of the annual instalment and can range up to a
maximum amount of EUR10 mn per year. The Group estimates that such
increased fees could range up to EUR5.3 mn per year (for each tax
year in scope i.e. since 2018) although the Group understands that
such fee may fluctuate annually as to be determined by the Ministry
of Finance. In this respect, an amount of EUR3 mn has been recorded
in 4Q2020 to bring the total amount provided for years 2018-2020 to
EUR16 mn, being the maximum expected increased amount for these
years (EUR13 mn in 4Q2019 and EUR19 mn in FY2019).
Voluntary Staff Exit Plans
In December 2020, the Group completed a targeted voluntary staff
exit plan (VEP) at a total cost of EUR6 mn, recorded in the
consolidated income statement in 4Q2020, resulting in a negative
impact of c.5 bps on the Group's CET1 ratio . In October 2019, the
Group completed a voluntary staff exit plan (VEP) at a total cost
of EUR81 mn, recorded in the consolidated income statement in
4Q2019, resulting in a negative impact of c.60 bps on the Group's
CET1 ratio. For further information please refer to Section B.3.2
'Total expenses'.
Sale of investment in CNP Cyprus Insurance Holdings Ltd
In October 2019, the sale of the Group's investment in its
associate CNP Cyprus Insurance Holdings Limited ("CNP") was
completed, resulting in a positive impact of c.30 bps on both the
Group's CET1 and Total Capital ratios, mainly from the release of
risk weighted assets. The shareholding had been acquired as part of
the acquisition of certain operations of Laiki Bank in 2013 and was
sold to CNP Assurances S.A. for a cash consideration of EUR97.5
mn.
Project Helix
In June 2019, Project Helix was completed resulting in a
positive impact of c.140 bps on both the Group's CET1 and Total
Capital ratios, mainly from the release of risk weighted assets.
Project Helix had an overall net positive impact on the Group
capital ratios of c.60 bps.
Implications on capital from the Outbreak of COVID-19
The Group continues to closely monitor developments in, and the
effects of COVID-19 on both the global and Cypriot economy. In
early 2020, the ECB announced a package of positive measures that
should help to support the capital position of banks, in order to
secure favourable conditions of financing for the economy with the
aim to mitigate the effects of the crisis. Specifically, the
measures increased the Group's capital base available to absorb
potential losses due to the crisis. In addition, the early adoption
of CRD V for the composition of the Pillar II Requirement provides
flexibility regarding the Group's compliance with the minimum
capital requirement of Pillar II.
In the context of the ECB's capital easing measures for
COVID-19, in April 2020, the Bank received an amendment to the
December 2019 SREP decision effective as of 12 March 2020, r
educing the Group's minimum phased-in CET1 capital ratio to 9.7%.
In addition, in March 2020, the ECB announced that banks are
temporarily allowed to operate below the level of Pillar II
Guidance (P2G), the capital conservation buffer (CCB) and the
countercyclical buffer. The CBC has set the level of the
countercyclical buffer for Cyprus at 0% for the years 2020 and
2019. In July 2020, the ECB committed to allow banks to operate
below the P2G and the combined buffer requirement until at least
end of 2022, without automatically triggering supervisory actions.
In addition, in April 2020, the CBC decided to delay the phasing-in
of the O-SII buffer. Further details are given above.
In June 2020, Regulation (EU) 2020/873, in response to the
COVID-19 pandemic, came into force, bringing forward some of the
capital-relieving measures that were due to come into force at a
later stage and introducing modifications as part of the wider
efforts of competent authorities to provide the support necessary
to the institutions. The main amendments affecting the Group's own
funds relate to the acceleration of the implementation of the new
SME discount factor under CRR II introduced in June 2020, instead
of June 2021, extending the IFRS 9 transitional arrangements and
introducing further relief measures to CET1, advancing the
application of the prudential treatment of software assets as
amended by CRR II, and introducing a temporary treatment of
unrealized gains and losses to exposures to central governments,
regional governments or local authorities, measured at fair value
through other comprehensive income.
With respect to the SME discount factor, banks will be required
to hold less capital against SMEs as revised capital discount
factors come into effect. These changes became effective in June
2020 and added 44 bps to capital in 2020 upon implementation (i.e.
as at 30 June 2020).
The amendments to the existing IFRS 9 transitional arrangements
relate to the extension of the transitional period for the
recalculation of the transitional adjustment on credit losses on
Stage 1 and Stage 2 loans (dynamic component). A 100% add-back of
IFRS 9 provisions is allowed for the years 2020 and 2021 reducing
to 75% in 2022, to 50% in 2023 and to 25% in 2024. The calculation
at each reporting period is to be made against Stage 1 and Stage 2
provisions as at 1 January 2020, instead of 1 January 2018. The
calculation of the static component has not been amended. These
amendments became effective in June 2020 and added 20 bps to
capital as at 31 December 2020.
In relation to the prudential treatment of intangibles, software
assets will no longer be deducted in full in CET1 calculations,
subject to certain criteria. The new amendments came into force
during 4Q2020 and added 18 bps to capital as at 31 December
2020.
Finally, institutions may remove from the calculation of their
CET1 the amount of unrealised gains and losses accumulated since 31
December 2019 for certain financial instruments accounted for as
'debt instruments measured at fair value through other
comprehensive income' in the balance sheet, corresponding to
exposures to central governments, to regional governments or to
local authorities and to public sector entities, excluding those
financial assets that are credit-impaired, subject to a scaling
factor set at 100% from January to December 2020, at 70% from
January to December 2021 and at 40% from January to December 2022.
The Bank applies the temporary relief as of 3Q2020 and the relief
contributed 2 bps to capital as at 31 December 2020.
B.2.2. Regulations and Directives
B.2.2.1 Revised rules on capital and liquidity (CRR II and CRD
V)
On 27 June 2019, the revised rules on capital and liquidity (CRR
II and CRD V) came into force. As this was an amending regulation,
the existing provisions of CRR apply, unless they are amended by
CRR II. Being a Regulation, CRR II is directly applicable in each
member state. Member states are required to transpose the CRD V
into national law. To date, this transposition has not yet taken
place. Certain provisions took immediate effect (primarily relating
to Minimum Requirement for Own Funds and Eligible Liabilities,
MREL), but most changes will start to apply from mid-2021. Certain
aspects of CRR II are dependent on final technical standards to be
issued by the EBA and adopted by the European Commission. The key
changes introduced consist of, among others, changes to qualifying
criteria for CET1, AT1 and Tier 2 instruments, introduction of MREL
requirements and a binding Leverage Ratio and Net Stable Funding
Ratio (NSFR) requirement.
B.2.2.2 Bank Recovery and Resolution Directive (BRRD)
Minimum Requirement for Own Funds and Eligible Liabilities
(MREL)
The Bank Recovery and Resolution Directive (BRRD) requires that
from January 2016 EU member states shall apply the BRRD's
provisions requiring EU credit institutions and certain investment
firms to maintain a minimum requirement for own funds and eligible
liabilities (MREL), subject to the provisions of the Commission
Delegated Regulation (EU) 2016/1450. On 27 June 2019, as part of
the reform package for strengthening the resilience and
resolvability of European banks, the BRRD came into effect and must
be transposed into national law. To date, this transposition has
not yet taken place. In addition, certain provisions on MREL have
been introduced in CRR which also came into force on 27 June 2019
as part of the reform package and took immediate effect.
In February 2021, the Bank received notification from the Single
Resolution Board (SRB) of the draft decision for the binding
minimum requirement for own funds and eligible liabilities (MREL)
for the Bank, determined as the preferred resolution point of
entry.
As per the draft decision, the minimum MREL requirement is set
at 23.32% of risk weighted assets and 5.91% of Leverage Ratio
Exposure (LRE) and must be met by 31 December 2025. Furthermore,
the Bank must comply by 1 January 2022 with an interim requirement
of 14.94% of risk weighted assets and 5.91% of LRE. The own funds
used by the Bank to meet the Combined Buffer Requirement (CBR) will
not be eligible to meet its MREL requirements expressed in terms of
risk-weighted assets. Once the above-mentioned decision becomes
final (expected end of March 2021/early April 2021), these
requirements will replace those that were previously
applicable.
The MREL ratio of the Bank as at 31 December 2020, calculated
according to SRB's eligibility criteria currently in effect and
based on the Bank's internal estimate, stood at 15.36% of risk
weighted assets (and at 14.92% of risk weighted assets as at 1
January 2021) and at c.10% of LRE (and at c.10% of LRE as at 1
January 2021). Pro forma for Project Helix 2, the MREL ratio of the
Bank as at 31 December 2020, calculated on the same basis, stood at
15.80% of risk weighted assets (and at 15.35% of risk weighted
assets as at 1 January 2021). The MREL ratio expressed as a
percentage of risk weighted assets does not include capital used to
meet the CBR amount, currently at 3.5% and expected to increase to
4% on 1 January 2022.
The MREL requirement per the draft decision is in line with the
Bank's expectations and funding plans, and in this context, the
Bank will consider initiating its MREL issuance, as part of its
overall capital and funding strategy.
B.2.3 Funding and Liquidity
Funding
Funding from Central Banks
At 31 December 2020, the Bank's funding from central banks
amounted to EUR995 mn, which relates to ECB funding, comprising
solely of funding through the Targeted Longer-Term Refinancing
Operations (TLTRO) III (compared to funding from central banks of
EUR997 mn as at 30 September 2020 and no funding from central banks
as at 31 December 2019). In June 2020, the Bank borrowed EUR1 bn
from the fourth TLTRO III operation, despite its comfortable
liquidity position, given the favourable borrowing rate, in
combination with the relaxation of collateral terms.
In addition, in March 2021 the Bank borrowed an additional
amount of EUR1.7 bn under the new TLTRO III operation, with a
potential NII benefit of up to EUR10.6 mn for the period from March
2021 to June 2022, based on current ECB rates and provided it meets
the lending thresholds.
Deposits
Customer deposits totalled EUR16,533 mn at 31 December 2020
(compared to EUR16,384 mn at 30 September 2020 and EUR16,692 mn at
31 December 2019), remaining broadly flat in the quarter and since
the year end.
The Bank's deposit market share in Cyprus reached 35.0% as at 31
December 2020, at similar levels as at 30 September 2020 and 31
December 2019. Customer deposits accounted for 77% of total assets
and 85% of total liabilities at 31 December 2020 (compared to 79%
of total assets and 89% of total liabilities at 31 December
2019).
The net Loans to Deposits (L/D) ratio stood at 63% as at 31
December 2020 (at the same level as at 30 September 2020 and
compared to 64% as at 31 December 2019). The L/D ratio had reached
a peak of 151% as at 31 March 2014.
Subordinated Loan Stock
At 31 December 2020 the Bank's subordinated loan stock
(including accrued interest) amounted to EUR272 mn (compared to
EUR267 mn at 30 September 2020 and EUR272 mn at 31 December 2019)
and relates to unsecured subordinated Tier 2 Capital Notes of
nominal value EUR250 mn, issued by the Bank in January 2017.
The Group is currently evaluating opportunities for a potential
Tier 2 capital transaction given the terms and maturity profile of
the Bank's existing EUR250 mn 10NC5 Tier 2 notes, subject to market
conditions.
Liquidity
At 31 December 2020 the Group Liquidity Coverage Ratio (LCR)
stood at 254% (compared to 256% at 30 September 2020 and 208% at 31
December 2019), above the minimum regulatory requirement of
100%.
The liquidity surplus in LCR at 31 December 2020 amounted to
EUR4.2 bn (compared to EUR4.1 bn at 30 September 2020 and EUR3.2 bn
at 31 December 2019). The increase in 2020 is driven mainly by the
borrowing of EUR1 bn TLTRO III in June 2020.
The Net Stable Funding Ratio (NSFR) has not yet been introduced.
It will be enforced as a regulatory ratio under CRR II in June
2021, with the limit set at 100%. At 31 December 2020, the Group's
NSFR, on the basis of Basel standards, stood at 139% (compared to
135% at 30 September 2020 and 127% at 31 December 2019).
Regulatory measures to mitigate the impact of COVID-19 crisis on
banks' liquidity position
Resulting from the outbreak of COVID-19, the ECB has adopted a
broad set of policy measures to mitigate the economic impact of the
crisis and to ensure that its directly supervised banks can
continue to fulfil their role in funding the real economy. The main
measures which have a direct or indirect impact on the liquidity
position of banks are summarised below:
-- The ECB allows banks to operate below the defined level of
100% of the LCR until at least end-2021 .
-- Collateral easing measures: The package included a set of
collateral easing measures, which resulted in increasing the banks'
borrowing capacity at the ECB operations and improving the
liquidity buffers due to the lower haircuts applied to the ECB
eligible collateral the bank holds, that consist of bonds and
Additional Credit Claims (ACC). The collateral easing packages are
designed mainly as temporary measures that will remain in place
until June 2022 and will be reassessed before then. Furthermore,
the ECB enlarged the scope of the ACC framework, increasing the
universe of eligible loans. In addition, the ECB announced changes
in collateral rules, temporarily accepting collateral with a rating
below investment grade, not lower than a certain rating level.
-- Favourable terms of LTRO operations: the package contained
measures to provide liquidity support to the euro area financial
system. Such measures include a series of LTROs which ran from
March to June 2020 so that participants could shift their
outstanding LTRO amounts to TLTRO III, as well as significant
amendments in the terms and characteristics of TLTRO III, including
a very low interest rate applicable to the TLTRO III funding,
provided the lending performance target during the specified
periods is achieved. Furthermore, a new series of longer-term
refinancing operations, called Pandemic Emergency Longer-Term
Refinancing Operations (PELTROs), with low rates, was
introduced.
Specifically, in December 2020 the ECB announced certain
amendments in the terms of the third series of targeted longer-term
refinancing operations (TLTRO III), including the extension of the
period over which more favourable terms will apply by twelve
months, to June 2022 and also announced that three additional TLTRO
III operations will be conducted between June and December 2021.
The Bank already participated in 2020 in TLTRO III by borrowing
EUR1 bn, which may benefit from the favourable terms for a further
12 months following the announcement by the ECB in December 2020,
provided it meets the lending threshold set by the ECB (with a
potential NII benefit of up to EUR5 mn). In addition, in March 2021
the Bank borrowed an additional amount of EUR1.7 bn under the new
TLTRO III operation, with a potential NII benefit of up to EUR10.6
mn for the period from March 2021 to June 2022, based on current
ECB rates and provided it meets the lending thresholds.
B.2.4 Loans
Group gross loans totalled EUR12,261 mn at 31 December 2020 ,
compared to EUR12,309 mn at 30 September 2020 and EUR12,822 mn at
31 December 2019. Gross loans of the Group's Cyprus operations
totalled EUR12,196 mn at 31 December 2020 accounting for 99% of
Group gross loans. Pro forma for Helix 2, gross loans are reduced
by EUR1,354 mn to EUR10,907 mn as at 31 December 2020.
New loans granted in Cyprus reached EUR1,351 mn for FY2020,
compared to EUR2,045 mn for FY2019, down by 34% yoy, impacted by
the outbreak of COVID-19. New lending in FY2020 comprised EUR596 mn
of corporate loans, EUR540 mn of retail loans (of which EUR363 mn
were housing loans), EUR144 mn of SME loans and EUR71 mn of
shipping and international loans. New loans granted in Cyprus
reached EUR374 mn for 4Q2020, compared to EUR288 mn for 3Q2020 (up
by 30% qoq) and to EUR443 mn for 4Q2019 (down by 16% yoy). The qoq
increase reflects demand for new loans in 4Q2020 picking up post
the COVID-19 lockdown in 1H2020, supported by Government
schemes.
At 31 December 2020, the Group net loans and advances to
customers totalled EUR9,886 mn (compared to EUR10,047 mn at 30
September 2020 and EUR10,722 mn at 31 December 2019). In addition,
at 31 December 2020 net loans and advances to customers of EUR493
mn were classified as held for sale in line with IFRS 5 and relate
to Project Helix 2 (EUR485 mn, comprising EUR310 mn relating to
Portfolio A and EUR175 mn relating to Portfolio B) and Helix Tail
(EUR8 mn), compared to EUR349 mn as at 30 September 2020 relating
to Project Helix 2 (EUR340 mn) and Helix Tail (EUR9 mn) and to
EUR26 mn as at 31 December 2019 relating to Helix Tail and Velocity
2.
The Bank is the single largest credit provider in Cyprus with a
market share of 41.9% at 31 December 2020, compared to 41.5% at 30
September 2020 and to 41.1% at 31 December 2019.
B.2.5 Loan portfolio quality
Tackling the Group's loan portfolio quality remains a top
priority for management. The Group has continued to make steady
progress across all asset quality metrics and the loan
restructuring activity has continued despite challenges brought
upon by COVID-19. The Group has been successful in engineering
restructuring solutions across the spectrum of its loan portfolio.
The Group's near-term priorities include completing the balance
sheet de-risking, whilst managing the post-pandemic NPE inflow.
The loan credit losses for FY2020 totalled EUR149 mn (excluding
'provisions/net loss relating to NPE sales, including restructuring
expenses'), compared to EUR146 mn for 2019. Further details
regarding loan credit losses are provided in Section B.3.3
'(Loss)/profit before tax and non-recurring items' below.
Loan moratorium
As part of the measures to support borrowers affected by
COVID-19 and the wider Cypriot economy, the Cyprus Parliament voted
for the suspension of loan repayments for interest and principal
(loan moratorium) for the period to the end of the year 2020, for
all eligible borrowers with no arrears for more than 30 days as at
the end of February 2020. Over 25,000 customers were approved,
relating to gross loans of c.EUR5.9 bn as at 31 December 2020 .
The payment holiday for all these loans expired on 31 December
2020 and their performance since the end of the moratorium is
encouraging. EUR3.8 bn of performing loans had an instalment due by
19 March 2021, and 96% of those resumed payments. Of the remaining
EUR2.1 bn loans under the moratorium, EUR0.3 bn of performing loans
have an instalment due between 19 March 2021 and end of March 2021,
EUR0.9 bn of performing loans have an instalment due in 2Q2021 and
EUR0.3 bn of performing loans have an instalment due in 2H2021.
Gross loans of EUR0.3 bn relate to NPEs as at the start of the
moratorium that were eligible and participated in the payment
deferral scheme. The remaining EUR0.3 bn relate to overdraft
facilities and current accounts with no instalment.
Gross loans to private individuals under payment deferrals that
expired on 31 December 2020 totalled EUR2.1 bn, of which EUR1.9 bn
related to performing loans. 93% of those performing loans had an
instalment due by 19 March 2021, and 93% of those resumed
payments.
Similarly, gross loans to businesses under payment deferrals
that expired on 31 December 2020 totalled EUR3.8 bn, of which
EUR3.4 bn related to performing loans. 59% of those performing
loans had an instalment due by 19 March 2021, and 98% of those
resumed payments.
At the same time reclassifications of c. EUR 260 mn of loans to
private individuals and c.EUR450 mn of loans to businesses under
payment deferrals were moved from Stage 1 to Stage 2 in FY2020,
mainly due to the significant increase in credit risk resulting
from the deterioration of the macro assumptions, and management
overlays. The Bank will continue to monitor this portfolio closely,
to ensure that problematic areas are identified at an early stage,
and appropriate solutions are provided to viable customers. To that
end, it has enhanced its monitoring process to include
transactional analysis to establish funds availability to meet
upcoming instalments and performance of daily monitoring of arrears
and excesses, as well as NPEs inflows and outflows.
Overall, regarding the economic effects of COVID-19, the impact
of IFRS 9 Forward Looking Information (FLI) driven by the
deterioration of the macroeconomic outlook, resulted in a EUR54 mn
charge included in FY2020 loan credit losses. The loan credit
losses charge (cost of risk) for FY2020 accounted for 1.18% of
gross loans, of which 43 bps reflect the deterioration of the
macroeconomic outlook in FY2020 (compared to a loan credit losses
charge of 1.12% for FY2019).
Finally, the provision coverage of Stage 3 loans under payment
deferrals that expired on 31 December 2020 of c.26% is considered
to be adequate, as it is higher than the coverage of re-performing
NPEs (NPEs in the pipeline to exit, subject to meeting all exit
criteria) of c.20%.
The table below presents the loans under payment deferrals that
expired on 31 December 2020, by IFRS 9 staging.
IFRS 9 staging for expired loan payment deferrals (EUR bn)
EUR bn 31.12.2020 31.12.2019
---------------------- ----------------------
Stage 1 3.96 4.35
---------------------- ----------------------
Stage 2 1.58 1.14
---------------------- ----------------------
Stage 3 0.33 0.46
---------------------- ----------------------
Total 5.87 5.95
---------------------- ----------------------
A second scheme for the suspension of loan repayments for
interest and principal (loan moratorium) was launched in January
2021 for customers impacted by the second lockdown. Payment
deferrals are offered to the end of June 2021, however, the total
months under loan moratorium, when including the loan moratorium
offered in 2020, cannot exceed a total of nine months. The
application period expired on 31 January 2021 and loans of c.EUR20
mn have been approved for the second moratorium. C lose monitoring
of the credit quality of loans in moratoria continues.
Following the outbreak of COVID-19, the sectors most adversely
affected are tourism, trade, transport and construction. The Group
has a well - diversified performing loan portfolio. For further
information on the Group's non-legacy loan book exposure to tourism
and trade and the performance of these loans after the expiry of
the loan moratorium, please refer to Section D. Business
Overview.
For further information please refer to the presentation for the
Group Financial Results for the year ended 31 December 2020 (slides
11 to 14).
Non-performing exposure reduction
During FY2020, and pro forma for Helix 2, non-performing
exposures (NPEs) as defined by the European Banking Authority (EBA)
were reduced by EUR2.1 bn, comprising organic NPE reductions of
EUR0.6 bn and NPE sales of EUR1.5 bn to EUR1,760 mn at 31 December
2020 (compared to EUR3,880 mn at 31 December 2019), and the NPE
ratio was reduced by 14 p.p. from 30% to 16%.
During 4Q2020 , NPEs were reduced by EUR152 mn (5%) during
4Q2020 (comprising organic NPE reductions of EUR85 mn and further
NPE reductions of EUR67 mn relating to the NPE sales lockbox),
compared to a reduction of EUR230 mn in 3Q2020 (comprising organic
NPE reductions of EUR208 mn and further NPE reductions of EUR22 mn
relating to the NPE sales lockbox), to EUR3,086 mn at 31 December
2020 (compared to EUR3,238 mn at 30 September 2020 and EUR3,880 mn
at 31 December 2019) . Pro forma for Helix 2, NPEs are reduced by a
further EUR1.3 bn to EUR1,760 mn on the basis of 31 December 2020
figures.
The NPEs account for 25% of gross loans as at 31 December 2020,
compared to 26% as at 30 September 2020 and 30% at 31 December
2019, on the same basis, i.e. including the NPE portfolios
classified as 'Non-current assets and disposal groups held for
sale'. Pro forma for Helix 2 the NPE ratio is reduced to 16% on the
basis of 31 December 2020 figures.
The NPE coverage ratio increased to 62% at 31 December 2020,
compared to 60% at 30 September 2020 and 54% at 31 December 2019,
on the same basis, i.e. including the NPE portfolios classified as
'Non-current assets and disposal groups held for sale'. When taking
into account tangible collateral at fair value, NPEs are fully
covered. Pro forma for Helix 2 the NPE coverage ratio is maintained
at 59% on the basis of 31 December 2020 figures.
As of 1 January 2021, the new regulation on Definition of
Default has been implemented, affecting NPE exposures and the
calculation of Days-Past-Due (please refer to Section F.
Definitions & Explanations for the changes in the definition).
The impact of these changes on the Group on 1 January 2021 is
immaterial.
31.12.2020 pro 31.12.2020 30.9.2020
forma
------------------- -------------------
% gross % gross % gross
EUR mn loans EUR mn loans EUR mn loans
---------------------------- --------- -------- --------- -------- --------- --------
NPEs as per EBA definition 1,760 16.1% 3,086 25.2% 3,238 26.3%
Of which, in pipeline to
exit:
-NPEs with forbearance
measures, no arrears(1) 245 2.2% 303 2.5% 312 2.5%
---------------------------- --------- -------- --------- -------- --------- --------
1. The analysis is performed on a customer basis.
Project Helix 2
In August 2020, the Group signed an agreement for the sale of a
portfolio of loans with gross book value of c.EUR898 mn (of which
EUR886 mn related to non-performing exposures) as at 30 June 2020,
known as Project Helix 2 Portfolio A. This portfolio had a
contractual balance of EUR1.46 bn as at the reference date of 30
September 2019 and comprises loans to mainly retail and
small-to-medium-sized enterprises, secured by real estate
collateral. This portfolio is classified as a disposal group held
for sale since 30 June 2020 and it includes other assets
(comprising properties and cash already received since the
reference date) amounting to c.EUR34 mn as at 30 June 2020.
The gross consideration amounts to 46% of the gross book value
as at 30 June 2020 and 29% of the contractual balance, payable in
cash, of which 35% is payable at completion, and the remaining 65%
is deferred without any conditions attached. The deferred component
is payable in three broadly equal instalments over 48 months from
completion. The consideration can be increased through an earnout
arrangement, depending on the performance of Portfolio A.
In January 2021, the Group reached agreement with the buyer of
Project Helix 2 Portfolio A for the sale of an additional portfolio
of loans with gross book value of EUR545 mn (of which EUR529 mn
related to non-performing exposures) as at 30 September 2020, known
as Project Helix 2 Portfolio B. The gross book value of EUR545 mn
includes other assets (comprising properties and cash already
received since the reference date) amounting to EUR26 mn as at 30
September 2020. This portfolio had a contractual balance of EUR783
mn as at the reference date of 30 September 2019 and comprises
loans to mainly retail and small-to-medium-sized enterprises,
secured by real estate collateral. This portfolio is classified as
a disposal group held for sale since 31 December 2020.
The gross consideration amounts to 44% of the gross book value
as at 30 September 2020 and 31% of the contractual balance as at
the reference date (30 September 2019), payable in cash, of which
50% is payable at completion and the remaining 50% is deferred up
to December 2025 without any conditions attached. The consideration
can be increased through an earnout arrangement, depending on the
performance of Portfolio B.
The completion of Helix 2 Portfolio B will be aligned with the
completion of Helix 2 Portfolio A and is currently estimated to
occur early in 2H2021. The completion of Project Helix 2 remains
subject to a number of conditions, including required customary
regulatory and other approvals.
Following a transitional period where servicing will be retained
by the Bank, it is intended that the servicing of both portfolios
will be carried out by a third party servicer selected and
appointed by the purchaser.
Project Helix 2 (Portfolios A and B) accelerates the Group's
strategy of de-risking its balance sheet, by reducing its stock of
NPEs by 43% to EUR1,760 mn pro forma on the basis of the 31
December 2020 figures, and its NPE ratio by 9 p.p., to 16% pro
forma on the basis of the 31 December 2020 figures.
Project Velocity 2
In May 2020, the Group completed the sale of a non-performing
loan portfolio of primarily retail unsecured exposures, with a
contractual balance of EUR398 mn and gross book value of EUR144 mn
as at the reference date of 31 August 2019 (known as Project
Velocity 2) to B2Kapital Cyprus Ltd. This portfolio comprised
c.10.000 borrowers, including c.8.400 private individuals and
c.1.600 small-to-medium-sized enterprises. The gross book value of
this portfolio as at the date of disposal was EUR133 mn. The sale
was broadly neutral to both the profit or loss and to capital.
Project Helix
In June 2019, the Group announced the completion of Project
Helix, that referred to the sale of a portfolio of loans with a
gross book value of EUR2.8 bn (of which EUR2.7 bn related to
non-performing loans), secured by real estate collateral to certain
funds affiliated with Apollo Global Management LLC, the agreement
of which was announced on 28 August 2018. Cash consideration of
c.EUR1.2 bn was received on completion, reflecting adjustments
resulting from, inter alia, loan repayments received on the Helix
portfolio since the reference date of 31 March 2018. The
participation of the Bank in the senior debt in relation to
financing Project Helix was syndicated down from the initial level
of EUR450 mn to c.EUR45 mn, representing c.4% of the total
acquisition funding. Upon completion, the NPE ratio was reduced by
c.11 p.p. to 33% as at 30 June 2019, c.70% lower than its peak in
2014.
Project Velocity 1
In June 2019, the Group completed the sale of a non-performing
loan portfolio of primarily retail unsecured exposures, with a
contractual balance of EUR245 mn and a gross book value of EUR34 mn
as at the reference date of 30 September 2018 (known as Project
Velocity 1) to APS Delta s.r.o. This portfolio comprised 9,700
heavily delinquent borrowers, including 8,800 private individuals
and 900 small-to-medium-sized enterprises. The gross book value of
this portfolio as at the date of disposal was EUR30 mn. The sale
was broadly neutral to both the profit or loss and to capital.
Additional strategies to accelerate de-risking
The Group remains committed to further de-risking its balance
sheet and will continue to seek solutions to achieve this. The
Group continues to work with its advisers towards the sale of
portfolios of NPEs in the future, assessing the potential to
accelerate the decrease in NPEs on the balance sheet through
additional sales of NPEs.
In the context of IFRS 9, other than the loan credit losses
relating to Project Helix 2 of EUR99 mn recorded upon the closing
of the transaction for each portfolio, the Bank recognised
additional loan credit losses of EUR21 mn in 2Q2020 as a result of
potential further NPE sales anticipated at the time . In December
2019, additional loan credit losses of EUR75 mn had been recognised
as a result of the anticipated balance sheet de-risking at the
time.
As at 31 December 2020, a portfolio of credit facilities related
to Project Helix of mainly secured non-performing exposures (known
as 'Helix Tail') with gross book value of EUR34 mn (compared to
EUR37 mn as at 30 September 2020 and EUR46 mn as at 31 December
2019), continues to be classified as a disposal group held for
sale.
B.2.6 Real Estate Management Unit (REMU)
The focus of the Real Estate Management Unit (REMU) is on the
disposal of on-boarded properties resulting from debt for asset
swaps. The Group completed disposals of EUR80 mn in FY2020
(compared to EUR207 mn in FY2019), resulting in a profit on
disposal of EUR9 mn for FY2020 (compared to a profit on disposal of
EUR32 mn for FY2019).
During the year ended 31 December 2020, the Group executed
sale-purchase agreements (SPAs) for disposals with contract value
of EUR91 mn (492 properties), compared to EUR345 mn (558
properties) for FY2019, excluding the sale of Cyreit. In addition,
the Group had signed SPAs for disposals of assets with contract
value of EUR53 mn as at 31 December 2020, compared to EUR54 mn as
at 30 September 2020 and EUR36 mn as at 31 December 2019 .
REMU on-boarded EUR146 mn of assets in FY2020 (down by 26% yoy),
via the execution of debt for asset swaps and repossessed
properties.
Details with respect to the prudential charge relating to the
onsite inspection findings are provided in Section B.2.1 'Capital
Base'.
Project Helix 2
Stock of property with a carrying value of EUR59 mn as at 31
December 2020 (compared to EUR11 mn as at 30 September 2020) is
classified as non-current assets and disposal groups held for sale
as it is included in the Helix 2 portfolio, comprising stock of
property with carrying value of EUR33 mn relating to Helix 2
Portfolio A and EUR25 mn of stock of property and EUR1 mn of
investment property relating to Helix 2 Portfolio B.
Completion of sale of Cyreit
In 2Q2019, the Group completed the sale of its entire holding in
the investment shares of the Cyreit Variable Capital Investment
Company PLC (Cyreit) (21 properties), recognising a loss of c. EUR1
mn. The total proceeds from the disposal of Cyreit were EUR160
mn.
Completion of Project Helix
With the completion of Project Helix in 2Q2019, properties with
a carrying value of EUR109 mn, in the Project Helix portfolio, were
derecognised as of 30 June 2019.
Assets held by REMU
As at 31 December 2020, assets held by REMU had a carrying value
of EUR1,457 mn (comprising properties of EUR1,350 mn classified as
'Stock of property' and EUR107 mn as 'Investment properties'),
compared to EUR1,467 mn as at 30 September 2020 (comprising
properties of EUR1,358 mn classified as 'Stock of property' and
EUR109 mn as 'Investment properties') and to EUR1,490 mn as at 31
December 2019 (comprising properties of EUR1,378 mn classified as
'Stock of property' and EUR112 mn as 'Investment properties').
In addition to assets held by REMU, properties classified as
'Investment properties' with carrying value of EUR21 mn as at 31
December 2020 (at the same levels as at 30 September 2020 and
compared to EUR24 mn as at 31 December 2019), relate to legacy
properties held by the Bank before the set-up of REMU in January
2016.
Assets held by REMU (Group) qoq
EUR mn FY2020 FY2019 4Q2020 3Q2020 + % yoy +%
------ ------ ------ ------ ----
Opening balance 1,490 1,530 1,467 1,456 1% -3%
----------------------------------------------------------------- ------ ------ ------ ------ ---- ------
On-boarded assets (including construction cost) 146 196 72 44 60% -26%
----------------------------------------------------------------- ------ ------ ------ ------ ---- ------
Sales (80) (207) (32) (24) 35% -61%
----------------------------------------------------------------- ------ ------ ------ ------ ---- ------
Net impairment loss (40) (24) (2) (9) -78% 63%
----------------------------------------------------------------- ------ ------ ------ ------ ---- ------
Transfer to non-current assets and disposal groups held for sale (59) (5) (48) - - -
----------------------------------------------------------------- ------ ------ ------ ------ ---- ------
Closing balance 1,457 1,490 1,457 1,467 -1% -2%
----------------------------------------------------------------- ------ ------ ------ ------ ---- ------
Analysis by type and country Cyprus Greece Romania Total
31 December 2020 (EUR mn)
------------------------------- ------- ------- -------- ------
Residential properties 158 24 0 182
Offices and other commercial
properties 240 26 5 271
Manufacturing and industrial
properties 74 29 0 103
Hotels 24 1 - 25
Land (fields and plots) 606 6 2 614
Golf courses and golf-related
property 262 - - 262
Total 1,364 86 7 1,457
------- ------- --------
Cyprus Greece Romania Total
31 December 2019 (EUR mn)
------------------------------- ------- ------- -------- ------
Residential properties 182 26 0 208
Offices and other commercial
properties 200 29 6 235
Manufacturing and industrial
properties 73 32 0 105
Hotels 24 0 - 24
Land (fields and plots) 628 7 3 638
Golf courses and golf-related
property 280 - - 280
Total 1,387 94 9 1,490
------- ------- --------
B.2.7 Non-core overseas exposures
The remaining non-core overseas net exposures (including both
on-balance sheet and off-balance sheet exposures) at 31 December
2020 are as follows:
EUR mn 31 December 2020 31 December 2019
-----------------
Greece 121 139
Romania 21 25
Russia 10 19
Total 152 183
-----------------
The Group continues its efforts for further deleveraging and
disposal of non-essential assets and operations in Greece, Romania
and Russia.
In addition to the above, as at 31 December 2020, there were
overseas exposures of EUR270 mn in Greece, relating to both loans
and properties (at the same level as at 30 September 2020 and
compared to EUR265 mn at 31 December 2019), not identified as
non-core exposures, since they are considered by management as
exposures arising in the normal course of business.
B.3. Income Statement Analysis
B.3.1 Total income
(FY)
(4q vs Yoy +
EUR mn FY2020 FY2019(1) 4Q2020 3Q2020 2Q2020 1Q2020 3q) +% %
--------------------------------------- -------- --------- ------ ------ ------ ------ ------- ------
Net interest income 330 344 80 82 83 85 -2% -4%
--------------------------------------- -------- --------- ------ ------ ------ ------ ------- ------
Net fee and commission
income 144 150 38 35 33 38 8% -4%
Net foreign exchange
gains and net gains
on financial instrument
transactions and disposal/dissolution
of subsidiaries and
associates 15 38 1 2 6 6 -62% -62%
Insurance income net
of claims and commissions 56 58 14 13 18 11 14% -3%
Net gains/(losses)
from revaluation and
disposal of investment
properties and on
disposal of stock
of properties 7 32 5 2 (1) 1 96% -79%
Other income 15 29 4 3 4 4 22% -48%
--------------------------------------- -------- --------- ------ ------ ------ ------ ------- ------
Non interest income 237 307 62 55 60 60 11% -23%
--------------------------------------- -------- --------- ------ ------ ------ ------ ------- ------
Total income 567 651 142 137 143 145 3% -13%
--------------------------------------- -------- --------- ------ ------ ------ ------ ------- ------
Net Interest Margin
(annualised)(2) 1.84% 1.90% 1.75% 1.79% 1.88% 1.95% -4 bps -6 bps
--------------------------------------- -------- --------- ------ ------ ------ ------ ------- ------
Average interest earning
assets
(EUR mn)(2) 17,931 18,051 18,215 18,191 17,690 17,539 0% -1%
--------------------------------------- -------- --------- ------ ------ ------ ------ ------- ------
1. The interest income, non-interest income, staff costs, other operating
expenses and loan credit losses relating to Project Helix are disclosed
under 'Provisions/net loss relating to NPE sales, including restructuring
expenses' in the underlying basis, in order to separate out the impact of
this non-recurring transaction. 2. Including the NPE portfolios classified
as "Non-current assets and disposal groups held for sale". p.p. = percentage
points, bps = basis points, 100 basis points (bps) = 1 percentage point
Net interest income (NII) and net interest margin (NIM) for
FY2020 amounted to EUR330 mn and 1.84% respectively, down by 4%
year on year, mainly due to the lower volume of new loans and
continued pressure on lending yields. NII and NIM for 4Q2020
amounted to EUR80 mn (compared to EUR82 mn for 3Q2020) and 1.75%
(compared to 1.79% for 3Q2020) respectively, as pressure on lending
yields continues.
Average interest earning assets for FY2020 amounted to EUR17,931
mn, down by 1% yoy . Quarterly average interest earning assets for
4Q2020 amounted to EUR18,215 mn, compared to EUR18,191 mn for
3Q2020 (flat qoq).
Non-interest income for FY2020 amounted to EUR237 mn (compared
to EUR307 mn in FY2019, down by 23% yoy), comprising net fee and
commission income of EUR144 mn, net foreign exchange gains and net
gains on financial instrument transactions and disposal/dissolution
of subsidiaries and associates of EUR15 mn, net insurance income of
EUR56 mn, net gains/(losses) from revaluation and disposal of
investment properties and on disposal of stock of properties of
EUR7 mn and other income of EUR15 mn. The yoy decrease is mainly
driven by lower net gains on disposal of stock of properties (REMU
gains), negatively impacted by COVID-19, lower revaluation gains on
financial instrument transactions and disposal/dissolution of
subsidiaries and associates, and lower other income. Non-interest
income for 4Q2020 amounted to EUR62 mn (compared to EUR55 mn for
3Q2020) up by 11% qoq, positively impacted by higher net fee and
commission income, as transactional volumes gradually recovered
post the COVID-19 lockdown in 1H2020, and higher net gains from
revaluation of investment properties (REMU gains).
Net fee and commission income for FY2020 amounted to EUR144 mn,
compared to EUR150 mn for FY2019, reflecting the COVID-19 lockdown
in 1H2020. Net fee and commission income for 4Q2020 amounted to
EUR38 mn, compared to EUR35 mn for 3Q2020, driven mainly by
increase in transactional volumes which gradually recovered post
the COVID-19 lockdown in 1H2020.
Net foreign exchange gains and net gains on financial instrument
transactions and disposal/dissolution of subsidiaries and
associates of EUR15 mn for FY2020 (comprising net foreign exchange
gains of EUR17 mn and net revaluation losses on financial
instrument transactions and disposal/dissolution of subsidiaries
and associates of EUR2 mn) decreased by 62% yoy. The yoy decrease
is mainly driven by lower net revaluation gains and
disposal/dissolution of subsidiaries and associates and lower net
foreign exchange gains in FY2020 resulting from the COVID-19
lockdown in 1H2020. Net foreign exchange gains and net gains on
financial instrument transactions and disposal/dissolution of
subsidiaries and associates of EUR1 mn for 4Q2020 (comprising net
foreign exchange gains of EUR2 mn and net revaluation losses on
financial instrument transactions of EUR1 mn) decreased by 62% qoq,
driven by lower net foreign exchange gains in 4Q2020.
Net insurance income of EUR56 mn for FY2020 (compared to EUR58
mn for FY2019), down by 3% yoy, reflecting the net impact of the
reduction of net claims in the general insurance business
positively impacted by the COVID-19 lockdown in 1H2020, and the
negative impact of the change in the valuation assumptions in the
life insurance business.
Net insurance income of EUR14 mn for 4Q2020 (compared to EUR13
mn for 3Q2020), up by 14% qoq , being the net result of higher
profit from new business and lower claims in the life insurance
business, and lower profits due to specific large claims in the
general insurance business.
Net gains/(losses) from revaluation and disposal of investment
properties and on disposal of stock of properties for FY2020
amounted to EUR7 mn (comprising a profit on disposal of stock of
properties of EUR9 mn and loss from revaluation of investment
properties of EUR2 mn), compared to EUR32 mn in FY2019, impacted by
the COVID-19 lockdown in 1H2020.
Net gains from revaluation and disposal of investment properties
and on disposal of stock of properties for 4Q2020 amounted to EUR5
mn (comprising a profit on disposal of stock of properties of
c.EUR2 mn and net gains from revaluation of investment properties
of c.EUR2 mn, mainly relating to specific properties in Greece) ,
compared to EUR2 mn in 3Q2020. REMU profit remains volatile.
Total income for FY2020 amounted to EUR567 mn, compared to
EUR651 mn for FY2019 (down by 13% yoy ). Total income for 4Q2020
amounted to EUR142 mn, compared to EUR137 mn for 3Q2020.
B.3.2 Total expenses
(4q vs (FY)
EUR mn FY2020 FY2019(1) 4Q2020 3Q2020 2Q2020 1Q2020 3q) +% Yoy +%
-------- --------- ------ ------ ------ ------ -------
Staff costs (195) (220) (50) (49) (47) (49) 1% -11%
Other operating expenses (145) (165) (41) (35) (34) (35) 16% -12%
Total operating expenses (340) (385) (91) (84) (81) (84) 7% -12%
-------- --------- ------ ------ ------ ------ -------
Special levy and
contributions to
Single Resolution
Fund (SRF) and Deposit
Guarantee Fund (DGF) (30) (25) (6) (9) (6) (9) -29% 22%
------------------------- -------- --------- ------ ------ ------ ------ ------- -------
Total expenses (370) (410) (97) (93) (87) (93) 4% -10%
------------------------- -------- --------- ------ ------ ------ ------ ------- -------
Cost to income ratio(2) 65% 63% 69% 68% 61% 64% +1 p.p. +2 p.p.
------------------------- -------- --------- ------ ------ ------ ------ ------- -------
Cost to income ratio
excluding special
levy and contributions
to SRF and DGF(2) 60% 59% 64% 62% 57% 58% +2 p.p. +1 p.p.
------------------------- -------- --------- ------ ------ ------ ------ ------- -------
1. The interest income, non-interest income, staff costs, other operating
expenses and loan credit losses relating to Project Helix are disclosed
under 'Provisions/net loss relating to NPE sales, including restructuring
expenses' in the underlying basis, in order to separate out the impact of
this non-recurring transaction. 2. Including the NPE portfolios classified
as "Non-current assets and disposal groups held for sale". p.p. = percentage
points, bps = basis points, 100 basis points (bps) = 1 percentage point
Total expenses for FY2020 were EUR370 mn (compared to EUR410 mn
for FY2019 and down by 10% yoy), 53% of which related to staff
costs (EUR195 mn), 39% to other operating expenses (EUR145 mn) and
8% (EUR30 mn) to special levy and contributions to Single
Resolution Fund (SRF) and Deposit Guarantee Fund (DGF). The yoy
decrease is driven by both lower other operating expenses and lower
staff costs, reflecting the on-going efforts for cost containment.
More information on these is provided further below.
Total operating expenses for FY2020 were EUR340 mn, compared to
EUR385 mn for FY2019 (down by 12% yoy). Total operating expenses
for 4Q2020 were EUR91 mn, compared to EUR84 mn for 3Q2020 (up by 7%
qoq).
Staff costs of EUR195 mn for FY2020 decreased by 11% yoy
(compared to EUR220 mn in FY2019), mainly driven by cost savings
following the completion of the voluntary staff exit plan (VEP) in
4Q2019, through which c.11% of the Group's full-time employees were
approved to leave at a total cost of EUR81 mn, recorded in the
consolidated income statement in 4Q2019. The annual savings net of
the impact from the renewal of the collective agreement for 2020,
are estimated at EUR23 mn or 11% of staff costs. Staff costs of
EUR50 mn for 4Q2020 increased by 1% qoq (compared to EUR49 mn in
3Q2020).
In December 2020, the Group completed a targeted voluntary staff
exit plan (VEP) with a total cost of EUR6 mn, recorded in the
consolidated income statement in 4Q2020 (as a non-recurring item in
the underlying basis). The gross annual savings are estimated at
c.EUR2 mn or c.1% of staff costs. The renewal of the collective
agreement for 2021 remains under discussion.
The Group employed 3,573 persons as at 31 December 2020
(compared to 3,577 as at 30 September 2020 and 3,672 as at 31
December 2019, including c.100 persons relating to Project Helix
who were transferred to the buyer upon full migration in January
2020). The staff costs relating to these persons (in FY2019) are
included within 'Provisions/net loss relating to NPE sales,
including restructuring expenses' in the underlying basis.
Other operating expenses for FY2020 were EUR145 mn, lower by 12%
yoy from EUR165 mn in FY2019, mainly due to lower consultancy,
marketing and property-related expenses in FY2020, resulting from
the focus of management to contain costs and savings from the
COVID-19 lockdown in 1H2020. Other operating expenses for 4Q2020
were EUR41 mn, compared to EUR35 mn for 3Q2020, up by 16% qoq
mainly due to seasonally higher marketing, property and
professional fees .
Special levy and contributions to Single Resolution Fund (SRF)
and Deposit Guarantee Fund (DGF) for FY2020 were EUR30 mn, compared
to EUR25 mn in FY2019 (increased by 22% yoy). Special levy and
contributions to Single Resolution Fund (SRF) and Deposit Guarantee
Fund (DGF) for 4Q2020 was EUR6 mn, compared to EUR9 mn in 3Q2020
(down by 29% qoq). The increase of c.EUR5 mn yoy and the decrease
of EUR3 mn qoq is driven by the contribution of the Bank to the
Deposit Guarantee Fund (DGF) first recorded in 2020, of which EUR3
mn relates to 1H2020 and EUR3 mn relates to 2H2020, and was
recorded in 1Q2020 and 3Q2020 respectively, in line with IFRSs.
As from 1 January 2020 and until 3 July 2024 the Bank is subject
to contribution to the Deposit Guarantee Fund (DGF) on a
semi-annual basis. The contributions are calculated based on the
Risk Based Methodology (RBM) as approved by the management
committee of the Deposit Guarantee and Resolution of Credit and
Other Institutions Schemes (DGS) and is publicly available on the
CBC's website. In line with the RBM, the contributions are broadly
calculated on the covered deposits of all authorised institutions
and the target level is to reach at 0.8% of these deposits by 3
July 2024.
The cost to income ratio excluding special levy and
contributions to Single Resolution Fund (SRF) and Deposit Guarantee
Fund (DGF) for FY2020 was 60%, broadly flat yoy. The cost to income
ratio excluding special levy and contributions to SRF and DGF for
4Q2020 was 64%, compared to 62% in 3Q2020, reflecting a higher
quarterly increase in total operating expenses compared to total
income.
B.3.3 (Loss)/profit before tax and non-recurring items
(4q vs (FY)
EUR mn FY2020 FY2019(1) 4Q2020 3Q2020 2Q2020 1Q2020 3q) +% Yoy +%
-------- --------- ------ ------ ------ ------ -------
Operating profit 197 241 45 44 56 52 2% -18%
----------------------------- -------- --------- ------ ------ ------ ------ ------- -------
Loan credit losses (149) (146) (31) (31) (23) (64) 1% 2%
Impairments of other
financial and non-financial
assets (42) (22) (6) (7) (25) (4) -6% 86%
Provisions for litigation,
claims, regulatory
and other matters (7) (10) (3) 0 (2) (2) - -31%
----------------------------- -------- --------- ------ ------ ------ ------ ------- -------
Total loan credit
losses, impairments
and provisions (198) (178) (40) (38) (50) (70) 6% 11%
----------------------------- -------- --------- ------ ------ ------ ------ ------- -------
(Loss)/profit before
tax and non-recurring
items (1) 63 5 6 6 (18) -21% -
----------------------------- -------- --------- ------ ------ ------ ------ ------- -------
Cost of risk(2) 1.18% 1.12% 0.99% 0.97% 0.76% 2.00% +2 bps +6 bps
----------------------------- -------- --------- ------ ------ ------ ------ ------- -------
1. The interest income, non-interest income, staff costs, other operating
expenses and loan credit losses relating to Project Helix are disclosed
under 'Provisions/net loss relating to NPE sales, including restructuring
expenses' in the underlying basis, in order to separate out the impact of
this non-recurring transaction. 2. Including the NPE portfolios classified
as "Non-current assets and disposal groups held for sale". p.p. = percentage
points, bps = basis points, 100 basis points (bps) = 1 percentage point
Operating profit for FY2020 was EUR197 mn, compared to EUR241 mn
for FY2019, down by 18% yoy. Operating profit for 4Q2020 was EUR45
mn, compared to EUR44 mn for 3Q2020 (up by 2% qoq).
The loan credit losses for FY2020 totalled EUR149 mn, compared
to EUR146 mn for FY2019. The loan credit losses for 4Q2020 totalled
EUR31 mn, flat qoq . Regarding the economic effects of COVID-19,
the impact of IFRS 9 Forward Looking Information (FLI) driven by
the deterioration of the macroeconomic outlook, resulted in a EUR11
mn charge included in 4Q2020 loan credit losses (compared to
charges of EUR5 mn, EUR10 mn and EUR28 mn included in 3Q2020,
2Q2020 and 1Q2020 loan credit losses respectively). Further details
on the loan moratorium are provided in Section B.2.5 'Loan
portfolio quality'.
The loan credit losses charge (cost of risk) for FY2020
accounted for 1.18% of gross loans, of which 43 bps reflect the
deterioration of the macroeconomic outlook in FY2020 (compared to a
loan credit losses charge of 1.12% for FY2019).
At 31 December 2020, the allowance for expected loan credit
losses, including residual fair value adjustment on initial
recognition and credit losses on off-balance sheet exposures
totalled EUR1,902 mn (compared to EUR1,933 mn at 30 September 2020
and EUR2,096 mn at 31 December 2019) and accounted for 15.5% of
gross loans including portfolios held for sale (compared to 15.7%
at 30 September 2020 and 16.3% at 31 December 2019). The decrease
in the allowance for expected loan credit losses in 4Q2020 amounted
to EUR31 mn (compared to a decrease of EUR110 mn in 3Q2020).
Impairments of other financial and non-financial assets for
FY2020 amounted to EUR42 mn (compared to EUR22 mn for FY2019) and
for 4Q2020 to EUR6 mn (compared to EUR7 mn for 3Q2020).
Provisions for litigation, claims, regulatory and other matters
for FY2020 totalled EUR7 mn, compared to EUR10 mn for FY2019.
Provisions for litigation, claims, regulatory and other matters for
4Q2020 were EUR3 mn, compared to nil for 3Q2020.
B.3. 4 (Loss)/profit after tax (attributable to the owners of
the Company)
(4q vs (FY)
EUR mn FY2020 FY2019(1) 4Q2020 3Q2020 2Q2020 1Q2020 3q) +% Yoy +%
-------- --------- ------ ------ ------ ------ -------
(Loss)/profit before
tax and non-recurring
items (1) 63 5 6 6 (18) -21% -
------------------------------- -------- --------- ------ ------ ------ ------ ------- -------
Tax (8) (3) (1) (2) (3) (2) -23% -
(Loss)/profit attributable
to non-controlling
interests 3 (2) (1) 0 4 (0) - -
(Loss)/profit after
tax and before non-recurring
items (attributable
to the owners of
the Company) (6) 58 3 4 7 (20) -32% -
-------- --------- ------ ------ ------ ------ -------
Advisory and other
restructuring costs
- organic (10) (22) (1) (3) (3) (3) -68% -52%
------------------------------- -------- --------- ------ ------ ------ ------ ------- -------
(Loss)/profit after
tax - organic (attributable
to the owners of
the Company) (16) 36 2 1 4 (23) 72% -
------------------------------- -------- --------- ------ ------ ------ ------ ------- -------
Provisions/net loss
relating to NPE sales,
including restructuring
expenses(2) (146) (92) (42) 3 (104) (3) - 58%
Restructuring costs
- Voluntary Staff
Exit Plan (VEP) (6) (81) (6) - - - - -
(DTC levy)/reversal
of impairment of
DTA and impairment
of other tax receivables (3) 88 (3) - - - - -
Loss on r emeasurement
of investment in
associate upon classification
as held for sale
(CNP) net of share
of profit from associates - (21) - - - - - -
(Loss)/profit after
tax (attributable
to the owners of
the Company) (171) (70) (49) 4 (100) (26) - 144%
-------- --------- ------ ------ ------ ------ -------
1. The interest income, non-interest income, staff costs, other operating
expenses and loan credit losses relating to Project Helix are disclosed
under 'Provisions/net loss relating to NPE sales, including restructuring
expenses' in the underlying basis, in order to separate out the impact of
this non-recurring transaction. 2. 'Provisions/net (loss)/profit relating
to NPE sales, including restructuring expenses' refer to the net loss on
transactions completed during each year/period, net loan credit losses on
transactions under consideration, as well as the restructuring costs relating
to these trades. For further details please see below. p.p. = percentage
points, bps = basis points, 100 basis points (bps) = 1 percentage point
The tax charge for FY2020 is EUR8 mn, compared to EUR3 mn for
FY2019. The tax charge for 4Q2020 is EUR1 mn, compared to EUR2 mn
for 3Q2020.
Loss after tax and before non-recurring items (attributable to
the owners of the Company) for FY2020 was EUR6 mn, compared to a
profit of EUR58 mn for FY2019. Profit after tax and before
non-recurring items (attributable to the owners of the Company) for
4Q2020 was EUR3 mn, compared to a profit of EUR4 mn for 3Q2020.
Advisory and other restructuring costs - organic for FY2020
amounted to EUR10 mn, compared to EUR22 mn for FY2019. Advisory and
other restructuring costs - organic for 4Q2020 amounted to EUR1 mn,
compared to EUR3 mn for 3Q2020.
Loss after tax arising from the organic operations (attributable
to the owners of the Company) for FY2020 amounted to EUR16 mn,
compared to a profit of EUR36 mn for FY2019. Profit after tax
arising from the organic operations (attributable to the owners of
the Company) for 4Q2020 amounted to EUR2 mn, compared to EUR1 mn
for 3Q2020.
Provisions/net loss relating to NPE sales, including
restructuring expenses for FY2020 amount to EUR146 mn (compared to
EUR92 mn for FY2019). Provisions/net loss relating to NPE sales,
including restructuring expenses, for 4Q2020 was EUR42 mn (compared
to a reversal of provisions of EUR3 mn for 3Q2020) and related
mainly to loan credit losses in relation to NPE sales.
Restructuring costs relating to NPE sales of c.EUR1.5 mn for 4Q2020
were included (Nil for 3Q2020).
Restructuring costs relating to the Voluntary Staff Exit Plan
(VEP) amounted to EUR6 mn for 4Q2020 and FY2020. For further
details please refer to Section B.3.2 'Total expenses'.
The DTC levy was EUR3 mn for 4Q2020 and FY2020, and relates to a
levy in the form of a guarantee fee relating to the revised Income
Tax legislation. The reversal of impairment of DTA and impairment
of other tax receivables was EUR88 mn for FY2019, comprising the
net positive impact of EUR96 mn following amendments to the Income
Tax legislation in Cyprus adopted in March 2019, and an impairment
of EUR8 mn relating to Greek tax receivables adversely impacted
from legislative changes. The carrying value of the remaining
receivable as at 31 December 2020 was EUR5 mn (at the same level as
at 30 September 2020 and 31 December 2019). For further information
please refer to 'Legislative amendments for the conversion of DTA
to DTC' within Section B.2.1. 'Capital base'.
Loss on remeasurement of investment in associate upon
classification as held for sale (CNP) net of share of profit from
associates totalled EUR21 mn for FY2019, comprising a loss on
remeasurement of investment in associate upon classification as
held for sale of EUR26 mn and a share of profit from associates of
EUR5 mn. In October 2019, the Group completed the sale of its
entire shareholding of 49.9% in its associate CNP Cyprus Insurance
Holdings Limited (CNP) that had been acquired as part of the
acquisition of certain operations of Laiki Bank in 2013 , for a
cash consideration of EUR97.5 mn .
Loss after tax attributable to the owners of the Company for
FY2020 was EUR171 mn , compared to a loss of EUR70 mn for FY2019.
Loss after tax attributable to the owners of the Company for 4Q2020
was EUR49 mn , compared to a profit of EUR4 mn for 3Q2020.
C. Operating Environment
The Cyprus economy declined steeply by 5.1% in 2020 according to
the Cyprus Statistical Service. However, this has been a better
performance than initially anticipated and better than most other
EU countries particularly in the south. The decline was driven by
the tourism, construction activity, industry and entertainment
related services sectors. In the tourism sector in particular,
total arrivals declined by 84% in 2020 and receipts by 85%. On the
expenditure side, the contraction was driven by a drop in net
exports and by private consumption to a lesser extent.
In the labour market, the unemployment rate increased modestly
to 7.6% in 2020 according to Eurostat, from 7.1% in 2019. Consumer
prices declined by 0.6% on average in 2020, owing to the sharp
decline in global energy prices, the hit on domestic demand caused
by the COVID-19 pandemic and the cut to the VAT rate for the
tourism and hospitality sector. The current fiscal and monetary
stimulus have not fed into higher prices and inflation is likely to
rise only modestly in the second half of 2021 as economic activity
accelerates and the temporary reduction in the VAT income is
reversed.
The Cyprus Government's fiscal package in 2020 in response to
the COVID-19 pandemic was large, at c.4.5% of GDP, according to
recent estimates, and included income support for households, wage
subsidies for businesses and grants to small businesses and the
self-employed.
A loan moratorium for interest and principal repayments on loans
for individuals and businesses was also put in place until the end
of 2020. In January 2021, a second moratorium for the period until
end-June 2021 was launched for borrowers impacted by the second
lockdown. Eligible borrowers are entitled to a total moratorium not
exceeding nine months, including the moratorium offered in
2020.
In the banking sector there has been significant progress since
the crisis in 2013. Capital adequacy has improved substantially,
and non-performing exposures have dropped steeply. The ratio of
NPEs to gross loans was 19.1% at the end of November 2020, or 15.7%
for companies and 26.2% for households. However, banking remains
vulnerable to the economic conditions amidst prevailing
uncertainties and slow progress on further reform.
Cyprus will benefit considerably from the EU's EUR750 bn Next
Generation funds. On a net basis, Cyprus expects to obtain grants
of up to EUR1.1 bn or about 5% of GDP, in the budget period
2021-2027. However, the effectiveness of the funds in the medium
and the long-term will depend on the implementation of long-delayed
structural reforms, such as improving the efficiency of the
judiciary and of the public and local administration.
Naturally, public finances deteriorated markedly in 2020 as a
result of the COVID-19 pandemic and the economic slump that ensued
in the year. It is estimated that t he budget deficit deteriorated
from a surplus of 1.5% of GDP in 2019 to a deficit of 5.0 % of GDP
in 2020 according to official statistics published by the Cyprus
Statistical Service . With restrictions tightened since early
October 2020 in response to a second wave of the pandemic, the
Government will be providing additional support to the economy, for
at least until the end of May 2021. As a result, the trend of lower
revenues and higher spending will continue through the first half
of 2021 at least. The Government's budget position is expected to
improve and the deficit to gradually shrink in the medium term as
the economy recovers and spending is scaled back. Public debt has
risen to c.118% of GDP (Cyprus Statistical Service). However, this
is seen as temporary driven by fiscal measures to mitigate the
effects of the COVID-19 pandemic. The underlying fundamentals
remain favourable and the downward trajectory is expected to resume
as growth returns. Cyprus' debt profile has improved considerably
in recent years by proactive debt management. Average maturity has
lengthened to around eight years and debt service costs have
dropped. In addition, the Government holds significant cash
buffers, at least equivalent to nine months of financing needs,
reducing short-term refinancing risk.
The monetary response of the ECB to the COVID-19 pandemic, has
been extremely accommodative. In addition to negative interest
rates and a renewed quantitative easing, most importantly, the ECB
introduced the Pandemic Emergency Purchase Programme (PEPP) and
boosted its refinancing operations for commercial banks. The ECB
also eased the rules around its collateral framework. The ECB
provided further stimulus in December 2020, including a EUR500 bn
increase in the size of the PEPP to EUR1.85 trillion and extending
its duration until March 2022. The ECB remains strongly committed
to preventing financial fragmentation in the Eurozone by keeping
interest rates low and the risk of a sovereign debt crisis
marginal.
The current account also deteriorated sharply in 2020 driven by
a substantial drop in net exports. However, the current account
deficit is expected to shrink gradually over the medium term as
exports earnings recover and as EU recovery funds are credited to
the secondary income account of the balance of payments.
Cyprus' reliance on external demand for tourism and travel,
means that economic recovery will be rather prolonged. Real GDP is
forecast to grow by 3.2% in 2021 and by another 3.1% in 2022
according to the European Commission (European Economic Forecast,
Winter 2021). Thus, real GDP can be expected to recover to
pre-pandemic levels within 2022.
The medium-term forecasts for the Cyprus economy are subject to
downside and upside risks. On the upside, the anticipated recovery
in the EU may be stronger. On the downside, vaccinations may take
longer to complete and may not be as effective as now anticipated,
especially if virus mutations spread. In this context it will take
longer for tourism activity to recover leading to a more permanent
loss of productive capacity. At the same time, fiscal policies may
prove less effective in the future, and more difficult to reverse,
ushering in a longer period of budget imbalances and rising debt
ratios. This may have implications for debt servicing costs. The UK
after Brexit may take longer to normalise its economy which may
give rise to a period of poor performances and exchange rate
pressures. Geopolitical tensions in the eastern Mediterranean may
escalate, delaying hydrocarbon exploitation.
Sovereign ratings
The sovereign risk ratings of the Cyprus Government improved
considerably in recent years reflecting improvements in economic
resilience and consistent fiscal outperformance. Cyprus
demonstrated policy commitment to correcting fiscal imbalances
through reform and restructuring of its banking system.
S&P Global Ratings maintains an investment grade rating of
BBB- with a stable outlook since September 2018. The rating and the
outlook were affirmed in March and September 2020, and in March
2021. In March 2021, S&P Global Ratings affirmed its rating and
outlook, balancing the risks from the pandemic's protracted adverse
impact on growth, fiscal, and banking sector performance against
benefits of the EU's Recovery and Resilience Facility (RRF)
transfers, as well as further improvement in the government's debt
profile.
Fitch Ratings maintains a Long-Term Issuer Default rating of
investment grade at BBB- since November 2018, affirmed in April and
October 2020, and in March 2021. Its outlook was upgraded to
positive in October 2019 and revised to stable in April 2020,
reflecting the significant impact the global COVID-19 pandemic
might have on the Cyprus economy and fiscal position. The stable
outlook was affirmed in March 2021.
Moody's Investors Service maintains a long-term credit rating of
Ba2 since July 2018 and a positive outlook since September 2019. In
January 2021, Moody's issued a revised credit opinion on the Cyprus
Sovereign, maintaining the positive rating outlook. This was driven
by the substantial reduction of non-performing exposures and a
favourable outlook on public debt reduction expected to resume
after the COVID-19 crisis. The large increase in debt related to
the COVID-19 pandemic is expected to be transitory in part because
of Cyprus' large fiscal surplus going into the pandemic.
In November 2020, DBRS Ratings affirmed the Republic of Cyprus's
Long-Term Foreign and Local Currency - Issuer Ratings at BBB (low)
with a stable trend.
D. Business Overview
Credit ratings
The Group's financial performance is highly correlated to the
economic and operating conditions in Cyprus. In January 2021, Fitch
Ratings affirmed their long-term issuer default rating of B-
(negative outlook). In April 2020, Fitch Ratings revised their
outlook to negative, reflecting the significant impact the outbreak
of COVID-19 might have on the Cypriot economy and consequently on
the Bank. In November 2020, Moody's Investors Service affirmed the
Bank's long-term deposit rating of B3 (positive outlook). In July
2020, Standard and Poor's affirmed their long-term issuer credit
rating on the Bank of 'B+' (stable outlook).
COVID-19 impact
The Group continues to deliver on its strategic priorities while
supporting its customers, colleagues and community in which it
operates through the COVID-19 crisis, ensuring at the same time
that all of its branches operate in accordance with the guidelines
and recommendations issued by the Ministry of Health.
The Group continues to closely monitor developments in, and the
effects of COVID-19 on both the global and Cypriot economy. The
changed economic environment in the first half of the year 2020
resulted in lower levels of economic activity and credit formation,
which gradually recovered in the third quarter of the year. The
restrictive measures imposed in the fourth quarter for the
management of the second wave have extended into the new year and
are expected to lead to some temporary loss of momentum in the
economic recovery in early 2021.
At the same time, statistics are encouraging as Cyprus ranks
first among EU countries in terms of testing for COVID-19 and fifth
globally for the management of the pandemic (Lowy Institute). In
addition, the development of effective vaccines is encouraging and
successful vaccination programmes both in Cyprus and abroad should
act as strong catalysts for both global and local economic
recovery. In fact, the Cyprus Government expects that over 60% of
the population over 18 years old will be vaccinated by the end of
June 2021.
In common with other European banks, the prolonged low interest
rate environment also continues to present a challenge to the
Group's profitability. As a consequence of the pandemic, the Bank
has updated its macroeconomic assumptions underlying the IFRS 9
calculation of loan credit losses in 1Q2020 in line with the
relevant regulatory guidance, resulting in increased organic loan
credit losses for 1Q2020 of EUR28 mn. During the year, these
assumptions were updated increasing the respective organic loan
credit losses to a total of EUR54 mn for the FY2020. At 31 December
2020, the Bank expected, under the base scenario, the Cypriot
economy to contract by 5.8% in 2020, with gradual recovery from
2021 onwards, with GDP growth of 4.0% expected for 2021. The Bank's
projections are broadly in line with those published by the CBC,
the Cyprus Ministry of Finance, the European Commission and the
Economics Research Centre of the University of Cyprus.
Upon the outbreak of COVID-19 in March 2020, the Pandemic
Incident Management Plan of the Group was invoked and a dedicated
team (Pandemic Incident Management Team) has been monitoring the
situation domestically and globally and providing guidance on
health and safety measures, travel advice and business continuity
for the Group. Local government guidelines are being followed in
response to the virus.
In accordance with the Pandemic Plan, the Group adopted a set of
measures to ensure minimum disruption to its operations. The
Pandemic Incident Management Team and the Crisis Management
Committee are still closely monitoring the dynamic COVID-19
pandemic developments and status. The measures comprise rules for
quarantine for vulnerable employees due to health conditions and
for those returning from epicentres of the infection. The Group
replaced face-to-face meetings with telecommunications, adjusting
the customary etiquette of personal contact, including those with
customers. Staff of critical functions have been split into
separate locations. In addition, to ensure continuity of business,
a number of employees have been working from home and the remote
access capability has been upgraded significantly, whilst at the
same time maintaining relevant control procedures to ensure
authorisation in line with the Group's governance structure.
Additionally, the Group follows strict rules of hygiene, increased
intensity of cleaning and disinfection of spaces, and other
measures to protect the health and safety of staff and
customers.
Also, the potential economic implications for the sectors in
which the Group is active have been assessed and possible
mitigating actions for supporting the economy have been identified,
such as supporting viable affected businesses and households with
new lending to cover liquidity, working capital, capital
expenditure and investments related to the activity of the
borrower.
The package of policy measures announced by the ECB and the
European Commission, as well as the unprecedented fiscal and other
measures of the Cyprus Government, have helped and should continue
to help reduce the negative impact and support the recovery of the
Cypriot economy.
As part of the measures to support borrowers affected by
COVID-19 and the wider Cypriot economy, the Cyprus Parliament voted
for the suspension of loan repayments for interest and principal
(loan moratorium) for the period to the end of the year 2020, for
all eligible borrowers with no arrears for more than 30 days as at
the end of February 2020. Over 25,000 customers were approved,
relating to gross loans of c.EUR5.9 bn as at 31 December 2020
(comprising gross loans to private individuals of EUR2.1 bn and
gross loans to businesses of EUR3.8 bn).
The payment holiday for all these loans expired on 31 December
2020 and their performance since the end of the moratorium is
encouraging. EUR3.8 bn of performing loans had an instalment due by
19 March 2021 and 96% of those resumed payments. Further details
are provided in Section B.2.5 'Loan portfolio quality'. Close
monitoring of the credit quality of these loans continues and
customers with early arrears are offered solutions.
A second scheme for the suspension of loan repayments for
interest and principal (loan moratorium) was launched in January
2021 for customers impacted by the second lockdown. Payment
deferrals are offered to the end of June 2021, however, the total
months under loan moratorium, when including the loan moratorium
offered in 2020, cannot exceed a total of nine months. The
application period expired on 31 January 2021 and loans of c.EUR20
mn have been approved for the second moratorium. C lose monitoring
of the credit quality of loans in moratoria continues.
Following the outbreak of COVID-19, the sectors most adversely
affected are tourism being the sector with the highest impact, then
trade with medium impact, and transport and construction with
moderate impact. The Group has a well - diversified performing loan
portfolio.
As at 31 December 2020, the Group's non-legacy loan book
exposure to tourism was limited to EUR1.1 bn (out of a total
non-legacy loan book of EUR9.2 bn), of which 91% were under payment
deferrals that expired at the end of 2020. 39% of performing loans
had an instalment due by 19 March 2021 and 99% of those resumed
payments. It is important to note, that the majority of
'accommodation' customers entered the crisis with significant
liquidity, following strong performance in recent years. The
reduction in international tourist arrivals in 2020, was partly
offset by domestic tourism, a trend expected to continue in 2021. A
recovery in tourism activity is expected from 2H2021 and will be
linked with international vaccination programmes, noting that
countries such as the UK and Israel (accounting for over 40% of
tourist arrivals) are well-progressed in their vaccination
programmes. Close monitoring of developments continues.
Respectively, the Group's non-legacy loan book exposure to trade
was EUR0.9 bn, of which 53% were under payment deferrals that
expired at the end of 2020. 89% of performing loans of this sector
had an instalment due by 19 March 2021 and 95% of those resumed
payments. It is important to note that c.30% of the exposure to
trade relates to lower-risk essential retail services, not
materially impacted by COVID-19.
Strategic priorities for the medium term
The Bank's medium-term strategic priorities remain clear, with a
sustained focus on strengthening its balance sheet, and improving
asset quality and efficiency, whilst maintaining a good capital
position, in order to continue to play a vital role in supporting
the recovery of the Cypriot economy. The Group continues to explore
opportunities to grow revenues in a more capital efficient way and
to improve efficiency through its digital transformation programme
in order to provide products and services while reducing operating
costs.
In addition, the Bank is looking to enhance its organisational
resilience and ESG (Environmental, Social and Governance) agenda by
building a forward-looking organisation with a clear strategy
supported by effective corporate governance aligned with ESG agenda
priorities. In order to further strengthen the Bank's corporate
responsibility regarding the protection of the environment the Bank
is proceeding with the launch of 'environmentally friendly' loan
products to promote investment in energy saving and environmentally
friendly products and services. The Bank maintains an ESG rating of
A (from a scale of AAA to CCC) from MSCI (June 2020).
Tackling the Bank's loan portfolio quality is of utmost
importance for the Group. Despite the challenging market conditions
resulting from the outbreak of COVID-19, the Group signed an
agreement for the sale of a portfolio of loans with gross book
value of c.EUR898 mn (of which EUR886 mn related to non-performing
exposures) as at 30 June 2020, known as Project Helix 2 Portfolio A
and also signed an agreement for the sale of an additional
portfolio of loans with gross book value of c.EUR545 mn (of which
EUR529 mn related to non-performing exposures) as at 30 September
2020, known as Project Helix 2 Portfolio B.
Project Helix (Portfolios A and B) represents a further
milestone in the delivery of one of the Group's strategic
priorities of improving asset quality through the reduction of
NPEs. Combined with a further EUR600 mn organic reduction in NPEs,
and a smaller NPE sale earlier in the year, the pro forma NPE
reduction for 2020 amounted to c.EUR2.1 bn, reducing NPEs to EUR1.8
bn and the NPE ratio to 16%. Overall, since the peak in 2014, the
stock of NPEs has been reduced by EUR13.2 bn or 88% and the NPE
ratio by 47 percentage points, from 63% to 16%, on the same
basis.
Project Helix 2 marks further progress against delivering on the
Group's strategic objectives of becoming a stronger, safer and more
efficient institution. The Group is now better positioned to manage
the challenges resulting from the impact of the ongoing COVID-19
crisis, and to support the recovery of the Cypriot economy.
The Group remains committed to further de-risking its balance
sheet and will continue to seek solutions to achieve this. The
Group continues to work with its advisers towards the sale of
portfolios of NPEs in the future, assessing the potential to
accelerate the decrease in NPEs on the balance sheet through
additional sales of NPEs. At the same time, following the outbreak
of COVID-19 and the expiration of the 2020 loan moratorium at the
end of year 2020, the Group remains focused on arresting any
potential asset quality deterioration and early managing
arrears.
The foreclosure process which had been suspended following the
outbreak of COVID-19, from 18 March 2020 until 31 August 2020 in
line with the decision of the Association of Cyprus Banks, resumed
on 1 September 2020. On 29 December 2020 the Cyprus Parliament
enacted via legislation the suspension of foreclosures of primary
residences with a value up to EUR350 thousand and of premises of
the borrower if they relate to "very small businesses" as defined
by the legislation, until 31 March 2021.
The Group continues to provide high quality new loans via
prudent underwriting standards and 99% of new exposures in Cyprus
since 2016 were performing at the start of the loan moratorium.
Growth in new lending in Cyprus has been focused on selected
industries more in line with the Bank's target risk profile, and
following the outbreak of COVID-19, the focus remains to support
the Cypriot economy in order to overcome the crisis. During the
quarter ended 31 December 2020, new lending amounted to EUR374 mn,
increased by 30% qoq, as new demand increased post the COVID-19
lockdown in 1H2020, supported by the Government schemes. The
pipeline for new housing loans is strong at over EUR140 mn as at
mid-March 2021.
Aiming at supporting investments by SMEs and mid-caps to boost
the Cypriot economy, and create new jobs for young people, the Bank
continues to provide joint financed schemes. To this end, the Bank
continues its partnership with the European Investment Bank (EIB),
the European Investment Fund (EIF) and the Cyprus Government.
The Group is currently evaluating opportunities for a potential
Tier 2 capital transaction given the terms and maturity profile of
the Bank's existing EUR250 mn 10NC5 Tier 2 notes, subject to market
conditions. Separately the Group continues to evaluate
opportunities to initiate its MREL issuance as part of its overall
capital and funding strategy.
The accelerated de-risking of the balance sheet increases
pressure on revenues in the near term. There are multiple
initiatives underway to increase net interest income and less
capital-intensive non-interest income, with a focus on fees,
insurance and non-banking business.
There are efforts underway to improve credit spreads, despite
competition pressures. Over the medium-term, the Group aims to grow
its performing book by c.10%, as well as to grow shipping and
international corporate lending with prudency.
At the same time, in order to further optimise its funding
structure, the Bank continues to focus on the shape and cost of
deposit franchise, taking advantage of the increased customer
confidence towards the Bank. The cost of deposits has been reduced
by 71 bps to 5 bps over the last three years. The reduction in the
cost of deposits amounts to 11 bps in FY2020, compared to a
reduction of 25 bps in FY2019. Moreover, liquidity fees for
specific customer groups were introduced in March 2020. The
introduction of liquidity fees to a broader group of corporate
clients, that was delayed due to the COVID-19 pandemic, was
implemented as of 1 February 2021. Separately, a new price list for
charges and fees was also implemented as of 1 February 2021, with
the positive impact from both initiatives to be estimated at
c.EUR13 mn per annum. Transactional fee volumes are expected to
recover to pre-COVID-19 levels, as the Cypriot economy
recovers.
The Bank already participated in 2020 in TLTRO III by borrowing
EUR1 bn, which may benefit from the favourable terms for a further
12 months following the announcement by the ECB in December 2020,
provided it meets the lending threshold set by the ECB (with a
potential NII benefit of up to EUR5 mn). In addition, in March 2021
the Bank borrowed an additional amount of EUR1.7 bn under the new
TLTRO III operation, with a potential NII benefit of up to EUR10.6
mn for the period from March 2021 to June 2022, based on current
ECB rates and provided it meets the lending thresholds.
In the medium-term, the Group aims to increase the average
product holding through cross selling to the under-penetrated
customer base, as well as to introduce the Digital Economy Platform
to generate new revenue sources, through leveraging the Bank's
market position, knowledge and digital infrastructure.
Management is placing emphasis on diversifying income streams by
optimising fee income from international transaction services,
wealth management and insurance. The Group's insurance companies,
EuroLife Ltd and General Insurance of Cyprus Ltd (GIC) operating in
the sectors of life and general insurance respectively, are leading
players in the insurance business in Cyprus, and have been
providing a stable, recurring fee income, further diversifying the
Group's income streams. The insurance income net of claims and
commissions for FY2020 amounted to EUR56 mn, (down 3% yoy),
contributing to 24% of non-interest income. Furthermore, there are
initiatives underway to enhance revenues from the insurance
business in the medium-term, in order to deliver sustainable
profitability and shareholder returns. Specifically, EuroLife Ltd
is aiming to improve total regular income mainly by extending its
customer base and using a new distribution philosophy; whereas GIC
is aiming to increase its gross written premiums mainly by
leveraging on the Bank's customer base through revamping its
bancassurance channel, and by focusing on high margin products.
Efficiencies through enhancing digital capabilities are also
expected in the medium-term.
The Digital Transformation Programme that started in 2017 has
begun to deliver an improved customer experience (see section
below), whilst the branch footprint rationalisation to date,
further improved the Bank's operating model. The number of branches
was reduced by 18% in 2019 and the branch network is now less than
half the size it was in 2013.
Management remains focused on further improvement in efficiency,
through further branch footprint rationalisation, further exit
solutions to release full time employees, containment of
restructuring costs following the completion of balance sheet
de-risking, enhancement of procurement control, as well as
reduction of total operating expenses by c.10% compared to FY2019
over the medium term despite inflation, facilitated by the Digital
Transformation Programme.
Digital Transformation
As part of its vision to be the leading financial hub in Cyprus,
the Bank continues its Digital Transformation Programme, which
focuses on three strategic pillars: developing digital services and
products that enhance the customer experience, streamlining
internal processes, and introducing new ways of working to improve
the workplace environment.
In recent months, a number of new features have been introduced
in the Bank's mobile banking app. Users can now use the app to
apply and obtain an eIDAS-certified digital signature, which
enables them to electronically sign any document on multiple
devices at their convenience. Also, 1bank subscribers can now
communicate with a Call Centre agent during working hours via the
mobile chat in order to ask questions and receive answers / resolve
issues. As of September 2020, users have the option to receive push
notifications via the mobile app instead of SMS messages for card
purchases and ATM withdrawals. Push notifications are an instant,
more secure channel that incurs no message specific cost to the
bank. Moreover, as of December 2020, users receive push
notifications on their mobile phones to authorize online card
transactions through the app (instead of SMS OTP), thus providing
even greater security. In addition to using the mobile banking app,
Visa cardholders can make secure and fast payments without having
to carry their mobile phone, using their Garmin or Fitbit
smartwatch.
The adoption of digital products and services continued to grow
and gained momentum in 2020. As at the end of January 2021, 85.4%
of the number of transactions involving deposits, cash withdrawals
and internal/external transfers were performed through digital
channels (up by 21 p.p. from 65% in September 2017 when the digital
transformation programme was initiated). Active mobile banking
users and active QuickPay users have grown by 20% and 76%
respectively in the last 12 months. The highest number of active
users to date was recorded in January 2021 with 91 thousand active
QuickPay users. The highest number of payments was recorded in
December 2020 with 228 thousand transactions.
In 2020, as a result of the COVID-19 restrictive measures, a
reduction has been observed in cash withdrawals and deposits
performed through the branch network. There was an increase in the
adoption of digital products and services and in digital subscriber
penetration as more customers have gained access to digital
channels and more cards have been issued. As at the end of January
2021, 74.5% of customers were considered as digitally engaged (up
by 15 p.p. from 60% since the digital transformation programme was
initiated in September 2017). A further increase is expected in
2021 driven by the increase in the number of subscribers and the
number of cards that have been issued.
As part of the Bank's ambition to be one of the cornerstones of
the digital economy, customers have been enabled to authorise the
release of their identification details to the Government, using
the 1bank credentials thus enabling a digital registration on the
Government Gateway Portal (Ariadni), where they can use electronic
services that are made available by the Government of Cyprus (up
until now citizens needed to be physically present to identify
themselves).
In addition, Bank of Cyprus is the first bank in the EU to offer
its customers the ability to obtain a Qualified Digital Signature
through the BoC mobile app without the need of physical presence. A
Qualified Digital Signature has the same legal effect as the
physical signature and thus can be used to sign digitally any
document. Signing can be done substantially faster than before and
offers an enhanced customer experience. The Bank currently offers
the signing of some of the Bank's documentation with the use of a
Digital Signature and has a roadmap in place to gradually offer the
digital signing of the majority of the Bank's documents.
Furthermore, as part of the Digital Transformation Programme,
major changes are underway in relation to enabling a modern and
more efficient workplace. New technologies and tools have been
introduced that will drastically change the employee experience,
improving collaboration and knowledge sharing across the
organisation. For instance, the rollout of Microsoft Surface
portable devices has been initiated to the employees whose role
demands high mobility, allowing them to work seamlessly wherever
they are. Further enhancements will be implemented in 2021 and the
full impact will be seen over the coming months.
E. Strategy and Outlook
The strategic objectives for the Group are to become a stronger,
safer and a more efficient institution capable of supporting the
recovery of the Cypriot economy and delivering appropriate
shareholder returns in the medium term.
The key pillars of the Group's strategy are to:
-- Complete balance sheet de-risking
-- Grow revenues in a more capital efficient way; by enhancing
revenue generation via growth in performing book
and less capital-intensive banking and financial services
operations (Insurance and Digital economy)
-- Improve operating efficiency; by achieving leaner operations
through digitisation and automation
-- Enhance organisational resilience and ESG (Environmental,
Social and Governance) agenda; by building a forward-looking
organisation with a clear strategy supported by effective corporate
governance aligned with ESG agenda priorities
KEY STRATEGIC ACTION TAKEN IN 2020 and to date PLAN OF ACTION
PILLARS
Complete
balance * Agreement for the sale of NPE portfolios totalling * Gross NPE reduction in 2021, through both organic and
sheet EUR1.3 bn, on the basis of 31 December 2020 figures. inorganic actions, expected to more than offset NPE
de-risking Combined with a further c.EUR600 mn organic reduction inflows
in NPEs, and a smaller NPE sale earlier in the year,
the pro forma NPE reduction for 2020 amounted to
c.EUR2.1 bn, reducing NPEs to EUR1.8 bn and the NPE
ratio from 30% to 16%. * Continue to work with advisers towards the sale of
portfolios of NPEs in the future, assessing the
potential to accelerate NPE reduction through
additional NPE sales
* For further information, please refer to Section
B.2.5 'Loan portfolio quality' and Section D
'Business Overview'
------------------------------------------------------------------- ---------------------------------------------------------------------
Grow revenues in
a more capital * Liquidity fees for specific customer groups were * Mitigating actions against NII challenges put in
efficient way; by introduced in March 2020 place, e.g. growing performing book and pricing
enhancing revenue away/price correctly deposits
generation via
growth
in performing * Liquidity fees to a broader group of corporate
book, and less clients, that was delayed due to the COVID-19 * Enhance fee and commission income, e.g. on-going
capital-intensive pandemic, was implemented as of 1 February 2021 review of price list for charges and fees, increase
banking and average product holding through cross selling, new
financial sources of revenue through introduction of Digital
services Economy Platform
operations * New price list for charges and fees was implemented
(Insurance as of 1 February 2021
and Digital
economy) * Profitable insurance business with further
opportunities to grow, e.g. focus on high margin
* For further information, please refer to Section D products, leverage on Bank's strong franchise and
'Business Overview' customer base for more targeted cross selling enabled
by DT
------------------------------------------------------------------- ---------------------------------------------------------------------
KEY STRATEGIC ACTION TAKEN IN 2020 and to date PLAN OF ACTION
PILLARS
Improve
operating * Targeted voluntary staff exit plan in 4Q2020 * Offer exit solutions to release full time employees
efficiency; by
achieving
leaner * Achieve further branch footprint rationalisation
operations * Reduced operating expenses in FY2020 by 12% yoy
through
digitisation * Contain restructuring costs following completion of
and automation balance sheet de-risking
* Further developments in the Digital Transformation
Programme
* Enhance procurement control
* For further information, please refer to Section D * Reduce total operating expenses by c.10% over the
'Business Overview' medium term despite inflation
-------------------------------------------------------------------- -------------------------------------------------------------------
Enhance
organisational * For further information, please refer to Section D * Enhanced structure and corporate governance
resilience and 'Business Overview'
ESG
(Environmental, * Focus on our people
Social and * Please refer to slide 38 in the FY2020 Group
Governance) Financial Results Investors Presentation
agenda; * Priority on ESG agenda , e.g. introduction of
by building a 'environmentally friendly' loan products
forward-looking
organisation
with a clear
strategy
supported by
effective
corporate
governance
aligned with
ESG agenda
priorities
-------------------------------------------------------------------- -------------------------------------------------------------------
Although there remains uncertainty in the broader economic
environment as a result of the pandemic, the Management remains
confident in delivering on the strategic objectives for the
Group.
The Group's near-term priorities include completing the balance
sheet de-risking, whilst managing the post-pandemic NPE inflow;
positioning the Bank on the path for sustainable profitability;
ensuring the cost base remains appropriate, whilst further
investing in the digital transformation programme in the near term
in order to modernise the Bank's franchise (in fact, the cost to
income ratio is expected to rise in the near term as revenues
remain under pressure and operating expenses increase due to higher
digitisation investment costs, and to reduce to mid-50s% in the
medium term); addressing the challenges from low rates and surplus
liquidity; and evaluating opportunities for a potential Tier 2
capital transaction given the terms and maturity profile of the
Bank's existing EUR250 mn 10NC5 Tier 2 notes, subject to market
conditions, whilst separately continuing to evaluate opportunities
to initiate its MREL issuance as part of its overall capital and
funding strategy.
The medium-term priorities include delivering sustainable
profitability and shareholder returns, enhancing revenues by
capitalising on the Group's market leading position; enhancing
operating efficiency; and optimising capital management.
The Group's medium-term strategic targets are set out below
against the actual metrics for the year ended 31 December 2020.
Key Metrics Strategic Targets for
2020 2022 Medium-Term
-------------- --------------
Return on Tangible Equity
Profitability (ROTE)(1) n/a 7%
------------------------------- ----------------------------------------------- --------------
Total operating expenses(2) EUR340 mn <EUR350 mn
------------------------------- ------------------------------- -------------- --------------
Asset Quality NPE ratio 16% pro forma for NPE sales <10% 5%
------------------------------- ------------------------------- -------------- --------------
Cost of risk 118 bps 70-80 bps
------------------------------- ----------------------------------------------- ------------------- --------------
Capital Supported by CET1 ratio of 15.2% transitional and At least 13%
pro forma for NPE sales
------------------------------- ------------------------------- ------------------------------
1. Return on Tangible Equity (ROTE) is calculated as Profit
after Tax divided by Shareholders' equity minus intangibles
assets.
2. Total operating expenses comprise staff costs and other
operating expenses. Total operating expenses do not include the
special levy or contributions to the Single Resolution Fund (SRF)
or Deposit Guarantee Fund (DGF) and do not include any advisory or
other restructuring costs.
Maintaining a strong capital base has been a key priority for
management over the past few years and this remains equally
important for the Group going forward. The business plan is based
on maintaining a CET1 ratio of at least 13% over the entire period
of the plan. The Group's capital is to be supported by organic
capital generation and by focus on less capital-intensive
businesses, the further reduction of high intensity risk weighted
assets and the Helix 2 risk weighted asset benefit upon full
repayment of deferred consideration. At the same time, factors that
could potentially have a negative impact on the Group's capital
ratios in addition to IFRS 9 phasing-in, include any potential
regulatory impacts, as well as one-off cost optimisation charges.
Until the completion of the de-risking and the restructuring of the
business, there may be volatility in the capital ratios due to the
timing of potential future impacts from regulatory changes and
one-off restructuring costs.
The Group has a clear strategy in place, leveraging on its
strong customer base, its renewed customer trust, its market
leadership position, and further developing digital knowledge and
infrastructure, in order to complete the turnaround of its business
and set the Bank on a path for profitability and delivering value
for shareholders.
F. Definitions & Explanations
Advisory and Comprise mainly: fees of external advisors in relation
other restructuring to: (i) disposal of operations and non-core assets,
costs and (ii) customer loan restructuring activities.
Allowance for Comprises (i) allowance for expected credit losses
expected loan (ECL) on loans and advances to customers (including
credit losses allowance for expected credit losses on loans and
(previously advances to customers held for sale), (ii) the residual
'Accumulated fair value adjustment on initial recognition of loans
provisions') and advances to customers, (iii) allowance for expected
credit losses for off-balance sheet exposures (financial
guarantees and commitments) disclosed on the balance
sheet within other liabilities, and (iv) the aggregate
fair value adjustment on loans and advances to customers
classified and measured at FVPL.
AT1 AT1 (Additional Tier 1) is defined in accordance
with Articles 51 and 52 of the Capital Requirements
Regulation (EU) No 575/2013, as amended by CRR II
applicable as at the reporting date.
CET1 capital CET1 capital ratio (transitional basis) is defined
ratio (transitional in accordance with the Capital Requirements Regulation
basis) (EU) No 575/2013, as amended by CRR II applicable
as at the reporting date.
CET1 fully loaded The CET1 fully loaded (FL) ratio is defined in accordance
(FL) ratio with the Capital Requirements Regulation (EU) No
575/2013, as amended by CRR II applicable as at the
reporting date.
Contribution Relates to the contribution made to the Deposit Guarantee
to DGF Fund.
Contribution Relates to the contribution made to the Single Resolution
to SRF Fund.
Cost to Income Cost-to-income ratio comprises total expenses (as
ratio defined) divided by total income (as defined).
Data referenced The data referenced in Section C. Operating Environment
is as publically available as at 17 March 2021.
Digital transactions This is the ratio of the number of digital transactions
ratio performed by individuals and legal entity customers
to the total number of transactions. Transactions
include deposits, withdrawals, internal and external
transfers. Digital channels include mobile, browser
and ATMs.
Digitally engaged This is the ratio of digitally engaged individual
customers ratio customers to the total number of individual customers.
Digitally engaged customers are the individuals who
use the digital channels of the Bank (mobile banking
app, browser and ATMs) to perform banking transactions,
as well as digital enablers such as a bank-issued
card to perform online card purchases, based on an
internally developed scorecard.
ECB European Central Bank
Gross loans Gross loans comprise: (i) gross loans and advances
to customers measured at amortised cost before the
residual fair value adjustment on initial recognition
(including loans and advances to customers classified
as non-current assets held for sale) and (ii) loans
and advances to customers classified and measured
at FVPL adjusted for the aggregate fair value adjustment
Gross loans are reported before the residual fair
value adjustment on initial recognition relating
mainly to loans acquired from Laiki Bank (calculated
as the difference between the outstanding contractual
amount and the fair value of loans acquired) amounting
to EUR230 mn at 31 December 2020 (compared to EUR243
mn at 30 September 2020 and EUR271 mn at 31 December
2019).
Additionally, gross loans include loans and advances
to customers classified and measured at fair value
through profit or loss adjusted for the aggregate
fair value adjustment of EUR326 mn at 31 December
2020 (compared to EUR334 mn at 30 September 2020
and EUR427 mn at 31 December 2019).
Group The Group consists f 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.
Legacy exposures Legacy exposures are exposures relating to (i) Restructuring
and Recoveries Division (RRD), (ii) Real Estate Management
Unit (REMU), and (iii) non-core overseas exposures.
F. Definitions & Explanations (continued)
Leverage ratio The leverage ratio is the ratio of tangible total
equity (including Other equity instruments) to total
assets as presented on the balance sheet.
Loan credit Loan credit losses comprise: (i) credit losses to
losses (PL) cover credit risk on loans and advances to customers,
(previously (ii) net gains on derecognition of financial assets
'Provision charge') measured at amortised cost and (iii) net gains on
loans and advances to customers at FVPL, for the
reporting period/year.
Loan credit Loan credit losses charge (cost of risk) (year to
losses charge date) is calculated as the annualised 'loan credit
(previously losses' (as defined) divided by average gross loans.
'Provisioning The average gross loans are calculated as the average
charge') (cost of the opening balance and the closing balance, for
of risk) the reporting period/year.
Market Shares Both deposit and loan market shares are based on
data from the CBC.
The Bank is the single largest credit provider in
Cyprus with a market share of 41.9% at 31 December
2020, compared to 41.5% at 30 September 2020, 41.7%
at 30 June 2020, 41.0% at 31 March 2020, 41.1% at
31 December 2019, 40.8% at 30 September 2019, 41.3%
at 30 June 2019, 46.7% at 31 March 2019, 45.4% at
31 December 2018 and as at 30 September 2018, 38.6%
at 30 June 2018 and 37.4% at 31 March 2018.
The market share on loans was affected as at 30 June
2019 following the derecognition of the Helix portfolio
upon the completion of Project Helix announced on
28 June 2019.
The market share on loans was affected during the
quarter ended 31 March 2019 following a decrease
in total loans in the banking sector of EUR1 bn,
mainly attributed to reclassification, revaluation,
exchange rate and other adjustments (CBC).
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 EUR6 bn non-performing
loans of Cyprus Cooperative Bank (CyCB) which remained
to SEDIPES as a result of the agreement between CyCB
and Hellenic Bank.
The market share on loans was affected as at 30 June
2018 following a decrease in total loans in the banking
sector of EUR2.1 bn, due to loan reclassifications,
revaluations, exchange rate or other adjustments
(CBC).
MSCI ESG Rating The use by the Bank of any MSCI ESG Research LLC
or its affiliates ('MSCI') data, and the use of MSCI
Logos, trademarks, service marks or index names herein,
do not constitute a sponsorship, endorsement, recommendation
or promotion of the Bank by MSCI. MSCI Services and
data are the property of MSCI or its information
providers and are provided "as-is" and without warranty.
MSCI Names and logos are trademarks or service marks
of MSCI.
Net fee and Fee and commission income less fee and commission
commission income expense divided by total income (as defined).
over total income
Net Interest Net interest margin is calculated as the net interest
Margin income (annualised) divided by the 'quarterly average
interest earning assets' (as defined).
Net loans and Net loans and advances to customers comprise gross
advances to loans (as defined) net of allowance for expected
customers loan credit losses (as defined, but excluding allowance
for expected credit losses on off-balance sheet exposures
disclosed on the balance sheet within other liabilities).
Net loans to Net loans to deposits ratio is calculated as gross
deposits ratio loans (as defined) net of allowance for expected
loan credit losses (as defined) divided by customer
deposits.
Net Stable Funding The NSFR is calculated as the amount of "available
Ratio (NSFR) 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.
The EBA NSFR will be enforced as a regulatory ratio
under CRR II in June 2021.
New lending New lending includes the disbursed amounts of the
new and existing non-revolving facilities (excluding
forborne or re-negotiated accounts) as well as the
average year to date change (if positive) of the
current accounts and overdraft facilities between
the balance at the beginning of the period and the
end of the period. Recoveries are excluded from this
calculation since their overdraft movement relates
mostly to accrued interest and not to new lending.
F. Definitions & Explanations (continued)
Non-interest Non-interest income comprises Net fee and commission
income income, Net foreign exchange gains and net gains
on financial instrument transactions and disposal/dissolution
of subsidiaries and associates (excluding net gains
on loans and advances to customers at FVPL), 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.
Non-performing A ccording to the EBA standards and ECB's Guidance
exposures (NPEs) to Banks on Non-Performing loans, NPEs are defined
as those exposures that satisfy one of the following
conditions:
(i) The borrower 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.
(ii) Defaulted or impaired exposures as per the approach
provided in the CRR, which would also trigger a default
under specific credit adjustment, distress restructuring
and obligor bankruptcy.
(iii) Material exposures as set by the CBC, which
are more than 90 days past due.
(iv) Performing forborne exposures under probation
for which additional forbearance measures are extended.
(v) Performing forborne exposures under probation
that present more than 30 days past due within the
probation period.
Exposures include all on and off balance sheet exposures,
except those held for trading, and are categorised
as such for their entire amount without taking into
account the existence of collateral.
The following materiality criteria are applied:
-- When a specific part of the exposures of a customer
that fulfils the NPE criteria set out above is greater
than 20% of the gross carrying amount of all on balance
sheet exposures of that customer, then the total
customer exposure is classified as non-performing;
otherwise only the specific part of the exposure
is classified as non-performing.
-- If a non-retail debtor has an exposure with significant
arrears of more than 90 days, the total customer
exposure is classified as non-performing, irrespective
of the 20% threshold.
-- Material arrears/excesses are defined as follows:
* Retail exposures: Total arrears/excesses amount
greater than EUR100
* Exposures other than retail: Total arrears/excesses
are greater than EUR500
and the amount in arrears/excess in relation to the
customer's total exposure is at least 1%.
-- If unlikeliness to pay is not identified at an
earlier stage, it is deemed to occur when an exposure
is 90 days past due, even where regulatory rules
permit default to be defined based on 180 days past
due.
-- The definitions of credit impaired and default
are aligned so that stage 3 represents all loans
which are considered defaulted or otherwise credit
impaired.
-- When a financial asset has been identified as
credit impaired, ECLs are measured as the difference
between the asset's gross carrying amount and the
present value of estimated future cash flows discounted
at the instrument's original effective interest rate.
Non-performing forborne exposures cease to be considered
as NPEs and in such case are transferred out of Stage
3, only when all of the following conditions are
met:
(i) The extension of forbearance measures does not
lead to the recognition of impairment or default.
(ii) One year has passed since the forbearance measures
were extended.
(iii) Following the forbearance measures and according
to the post-forbearance conditions, there is no past
due amount or concerns regarding the full repayment
of the exposure.
(iv) No unlikely-to-pay criteria exist for the debtor.
(v) The debtor has made post-forbearance payments
of a non-insignificant amount of capital (different
capital thresholds exist according to the facility
type).
F. Definitions & Explanations (continued)
Non-performing Non-performing non-forborne exposures cease to be
exposures (NPEs) considered as NPEs and in such case are transferred
(continued/) out of Stage 3, only when all conditions for which
the exposures were classified originally as NPEs,
cease to apply.
When an account exits Stage 3, it is transferred
to Stage 2 for a probationary period of 6 months.
At the end of this period, the significant increase
in credit risk (SICR) trigger is activated and the
loan is either transferred to Stage 1 or remains
in Stage 2. The reversal of previous unrecognised
interest on loans and advances to customers that
no longer meet Stage 3 criteria is presented in 'Credit
losses to cover credit risk on loans and advances
to customers'.
New default definition effective from 1 January 2021
From 1 January 2021 two regulatory guidelines came
into force that affect NPE classification and Days-Past-Due
calculation. More specifically, these are the RTS
on the Materiality Threshold of Credit Obligations
Past Due (EBA/RTS/2016/06), and the Guideline on
the Application of the Definition of Default under
article 178 (EBA/RTS/2016/07).
As a result of the above, the following changes came
into effect as from 1 January 2021:
1. New Days-past-Due (DPD) counter: The new counter
will begin counting DPD as soon as the arrears or
excesses of an exposure reach the materiality threshold
(rather than the first day of presenting any amount
of arrears in excesses). Similarly, the counter will
be set to zero when the arrears or excesses drop
below the materiality threshold. Payments towards
the exposure that do not reduce the arrears/excesses
below the materiality threshold, will not impact
the counter.
2. Additionally to the above criteria for the exit
of non-performing exposures the following condition
should also be met:
A period of one year has passed since the latest
of the following events:
a. The restructuring date
b. The date the exposure was classified as non-performing
c. The payment of interest and capital for at least
12 months
3. Non-performing non-forborne exposures cease to
be considered as NPEs only when all of the following
conditions are met:
(i) a three- month probation period has passed
(ii) no trigger of default continues to apply
(iii) no unlikely-to-pay criteria exist for the debtor
4. As per the new definition of default, the 20%
materiality threshold and the 90 days past due counter,
will no longer apply for non-retail exposures i.e.
any non-performing exposure of the customer, for
any reason, will result in a non-performing classification
at customer level.
Non-recurring Non-recurring items as presented in the 'Unaudited
items Consolidated Income Statement - Underlying basis'
relate to the following items, as applicable: (i)
advisory and other restructuring costs - organic,
(ii) restructuring costs - Voluntary Staff Exit Plan
(VEP), (iii) Provisions/net loss relating to NPE
sales, including restructuring expenses, (iv) (DTC
levy)/reversal of impairment of DTA and impairment
of other tax receivables and (v) Loss on remeasurement
of investment in associate upon classification as
held for sale (CNP) net of share of profit from associates
(for the year ended 31 December 2019 only).
NPE coverage The NPE coverage ratio is calculated as the allowance
ratio (previously for expected loan credit losses (as defined) over
'NPE Provisioning NPEs (as defined).
coverage ratio')
NPE ratio NPEs ratio is calculated as the NPEs as per EBA (as
defined) divided by gross loans (as defined).
F. Definitions & Explanations (continued)
NPE sales NPE sales refer to sales of NPE portfolios completed
in each period and contemplated sale transactions,
as well as potential further NPE sales, at each reporting
date, irrespective of whether or not they met the
held for sale classification criteria at the reporting
dates. They include both Project Helix and Project
Helix 2, as well as other portfolios.
Operating profit The operating profit comprises profit before Total
loan credit losses, impairments and provisions (as
defined), tax, (profit)/loss attributable to non-controlling
interests and non-recurring items (as defined).
Operating profit Operating profit return on average assets is calculated
return on average as the annualised operating profit (as defined) divided
assets by the quarterly average of total assets for the
relevant period. Average total assets exclude total
assets of discontinued operations at each quarter
end, if applicable.
Phased-in Capital In accordance with the legislation in Cyprus which
Conservation has been set for all credit institutions, the applicable
Buffer (CCB) rate of the CCB is 1.25% for 2017, 1.875% for 2018
and 2.5% for 2019 (fully phased-in).
Profit/(loss) This refers to the profit or loss after tax (attributable
after tax and to the owners of the Company) , excluding any 'non-recurring
before non-recurring items' (as defined).
items (attributable
to the owners
of the Company)
Profit/(loss) This refers to the profit or loss after tax (attributable
after tax - to the owners of the Company) , excluding any 'non-recurring
organic (attributable items' (as defined , except for the ' advisory and
to the owners other restructuring costs - organic') .
of the Company)
Project Helix Project Helix refers to the sale of a portfolio of
loans with a gross book value of EUR2.8 bn completed
in June 2019. For further information please refer
to section B.2.5 Loan portfolio quality.
Project Helix Project Helix 2 refers to the portfolio of loans
2 with a gross book value of EUR898 mn as at 30 June
2020 for which an agreement for sale was reached
in August 2020 (Portfolio A) and to the portfolio
of loans with a gross book value of EUR545 mn as
at 30 September 2020 for which an agreement for sale
was reached in January 2021 (Portfolio B). For further
information please refer to section B.2.5 Loan portfolio
quality.
Quarterly average This relates to the average of 'interest earning
interest earning assets' as at the beginning and end of the relevant
assets quarter. Average interest earning assets exclude
interest earning assets of any discontinued operations
at each quarter end, if applicable. Interest earning
assets include: cash and balances with central banks,
plus loans and advances to banks, plus net loans
and advances to customers (including loans and advances
to customers classified as non-current assets held
for sale), plus investments (excluding equities and
mutual funds).
Qoq Quarter on quarter change
Special levy Relates to the special levy on deposits of credit
institutions in Cyprus.
Total Capital Total capital ratio is defined in accordance with
ratio the Capital Requirements Regulation (EU) No 575/2013
, as amended by CRR II applicable as at the reporting
date.
Total expenses Total expenses comprise staff costs, other operating
expenses and the special levy and contributions to
the Single Resolution Fund (SRF) and Deposit Guarantee
Fund (DGF).
It does not include (i) 'advisory and other restructuring
costs-organic', or (ii) any restructuring costs relating
to NPE sales, or (iii) any restructuring costs relating
to the Voluntary Staff Exit Plan, or (iv) the DTC
levy. (i) 'Advisory and other restructuring costs-organic'
amounted to EUR1 mn for 4Q2020 (compared to EUR3
mn for 3Q2020, EUR3 mn for 2Q2020, EUR3 mn for 1Q2020
and EUR8 mn for 4Q2019). (ii) Restructuring costs
relating to NPE sales amounted to c.EUR1.5 mn for
4Q2020 (compared to Nil for 3Q2020, EUR1 mn for 2Q2020,
EUR3 mn for 1Q2020 and EUR10 mn for 4Q2019). (iii)
Restructuring costs relating to the Voluntary Staff
Exit Plan amounted to EUR6 mn for 4Q2020 and FY2020
(compared to EUR81 mn for 4Q2019 and FY2019). (iv)
The DTC levy amounted to EUR3 mn for 4Q2020 and FY2020
(compared to nil for FY2019).
F. Definitions & Explanations (continued)
Total income Total income comprises net interest income and non-interest
income (as defined).
Total loan credit Total loan credit losses, impairments and provisions
losses, impairments comprises loan credit losses (as defined), plus impairments
and provisions of other financial and non-financial assets, plus
provisions for litigation, claims, regulatory and
other matters.
Underlying basis This refers to the statutory basis after being adjusted
for certain items as explained in the Basis of Presentation.
Write offs Loans together with the associated loan credit losses
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
Basis of Presentation
This announcement covers the results of Bank of Cyprus Holdings
Public Limited Company, "BOC Holdings" or "the Company", its
subsidiary Bank of Cyprus Public Company Limited, the "Bank" or
"BOC PCL", and together with the Bank's subsidiaries, the "Group",
for the year ended 31 December 2020.
At 31 December 2016, the Bank was listed on the Cyprus Stock
Exchange (CSE) and the Athens Exchange. On 18 January 2017, BOC
Holdings, incorporated in Ireland, was introduced in the Group
structure as the new holding company of the Bank. On 19 January
2017, the total issued share capital of BOC Holdings was admitted
to listing and trading on the LSE and the CSE.
Financial information presented in this announcement is being
published for the purposes of providing an overview of the Group
financial results for the year ended 31 December 2020. This
announcement includes an update of the performance of loans under
payment deferrals that expired on 31 December 2020.
The financial information in this announcement does not
constitute statutory financial statements of BOC Holdings within
the meaning of section 340 of the Companies Act 2014. The Group
statutory financial statements for the year ended 31 December 2020,
upon which the auditors have given an unqualified report, are
expected to be published today and delivered to the Registrar of
Companies of Ireland within 28 days of 30 September 2021. The Board
of Directors approved the Group statutory financial statements for
the year ended 31 December 2020 on 29 March 2021. BOC Holdings'
statutory financial statements for the purposes of Chapter 4 of
Part 6 of the Companies Act 2014 of Ireland for the year ended 31
December 2019, upon which the auditors had given an unqualified
audit report, were published on 29 April 2020 and were annexed to
the annual return and delivered to the Registrar of Companies of
Ireland.
Statutory basis: Audited s tatutory information is set out on
pages 4-5. However, a number of factors have had a significant
effect on the comparability of the Group's financial position and
performance. Accordingly, the results are also presented on an
underlying basis.
Underlying basis: The financial information presented under the
underlying basis provides an overview of the Group financial
results for the year ended 31 December 2020, which the management
believes best fits the true measurement of the financial
performance and position of the Group. For further information,
please refer to 'Commentary on Underlying Basis' on page 7. The
statutory results are adjusted for certain items (as described on
pages 9-10) to allow a comparison of the Group's underlying
financial position and performance, as set out on pages 6-8.
This announcement and the presentation for the Group Financial
Results for the year 31 December 2020 have been posted on the
Group's website www.bankofcyprus.com (Investor Relations/Financial
Results).
Definitions: The Group uses definitions in the discussion of its
business performance and financial position which are set out in
section F.
The Group Financial Results for the year ended 31 December 2020
are presented in Euro (EUR) and all amounts are rounded as
indicated. A comma is used to separate thousands and a dot is used
to separate decimals.
Forward Looking Statements
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-looking. Examples of forward-looking
statements include, but are not limited to, statements relating to
the Group's near term, medium term and longer term future capital
requirements and ratios, intentions, beliefs or current
expectations and projections about the Group's future results of
operations, financial condition, expected impairment charges, the
level of the Group's assets, liquidity, performance, prospects,
anticipated growth, provisions, impairments, business strategies
and opportunities. By their nature, forward-looking statements
involve risk and uncertainty because they relate to events, and
depend upon circumstances, that will or may occur in the future.
Factors that could cause actual business, strategy and/or results
to differ materially from the plans, objectives, expectations,
estimates and intentions expressed in such forward-looking
statements made by the Group include, but are not limited to:
general economic and political conditions in Cyprus and other
European Union (EU) Member States, interest rate and foreign
exchange fluctuations, legislative, fiscal and regulatory
developments, information technology, litigation and other
operational risks, adverse market conditions, the impact of
outbreaks, epidemics or pandemics, such as the COVID-19 pandemic
and ongoing challenges and uncertainties posed by the COVID-19
pandemic for businesses and governments around the world. Should
any one or more of these or other factors materialise, or should
any underlying assumptions prove to be incorrect, the actual
results or events could differ materially from those currently
being anticipated as reflected in such forward looking statements.
The forward-looking statements made in this document are only
applicable as at the date of publication of this document. Except
as required by any applicable law or regulation, the Group
expressly disclaims any obligation or undertaking to release
publicly any updates or revisions to any forward looking statement
contained in this document to reflect any change in the Group's
expectations or any change in events, conditions or circumstances
on which any statement is based.
Contacts
For further information please contact:
Investor Relations
+ 357 22 122239
investors@bankofcyprus.com
The Bank of Cyprus Group is the leading banking and financial
services group in Cyprus, providing a wide range of financial
products and services which include retail and commercial banking,
finance, factoring, investment banking, brokerage, fund management,
private banking, life and general insurance. The Bank of Cyprus
Group operates through a total of 95 branches in Cyprus, of which
11 operate as cash offices. Bank of Cyprus also has representative
offices in Russia, Ukraine and China. The Bank of Cyprus Group
employs 3,573 staff worldwide. At 31 December 2020, the Group's
Total Assets amounted to EUR21.5 bn and Total Equity was EUR2.1 bn.
The Bank of Cyprus Group comprises Bank of Cyprus Holdings Public
Limited Company, its subsidiary Bank of Cyprus Public Company
Limited and its subsidiaries.
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END
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