TIDMBOCH
RNS Number : 0772M
Bank of Cyprus Holdings PLC
19 May 2022
Announcement
Group Financial Results for the quarter ended 31 March 2022
Nicosia, 19 May 2022
This announcement contains inside information for the purposes
of Article 7 of the Market Abuse Regulation (EU) 596/2014.
Key Highlights for the quarter ended 31 March 2022
Supportive Macro, Reflected in Volume Growth
* +5.6%(1) GDP growth in 1Q2022; expected to slow down
to +2.7%(2) in FY2022 due to geopolitical risks
* Loan momentum building up; performing book increased
by 2% in 1Q2022 with record new lending of EUR618 mn
Resilient Underlying Profitability
* Total income of EUR146 mn, up 7% yoy with net fee and
commission income up 13% yoy and NII down 7% yoy, as
expected, reflecting the impact of NPE trades
* Resilient profit after tax and before non-recurring
items of EUR27 mn, up 65% yoy; underlying ROTE of
6.7%
* Profit after tax of EUR21 mn for 1Q2022 vs EUR8 mn in
1Q2021
Operating Efficiency
* Total operating expenses(3) of EUR86 mn for 1Q2022,
up 4% yoy
* Cost to income ratio(3) at 59% for 1Q2022, down 1
p.p. yoy
Strong Capital and Liquidity
* CET1 ratio of 15.2%(4,5) and Total Capital ratio of
20.3%(4,5) ; impacted by the phasing-in of IFRS 9
* Deposits at EUR17.7 bn up 1% qoq; significant surplus
liquidity of EUR6.4 bn
Mid - Single Digit NPE Ratio(5)
* NPE ratio reduced to 6.5%(5) (2.7%(5,6) net) down 1
p.p. qoq
* Coverage at 60%(5) ; cost of risk at 44 bps
1. Source: Cyprus Statistical Service, Ministry of Finance
2. Source: Stability Programme 2022-2025 published on 2 May 2022
by Ministry of Finance
http://mof.gov.cy/assets/modules/wnp/articles/202205/1115/docs/stability_programme_22_25_en_final.pdf
3. Excluding special levy on deposits and other levies/contributions
4. Allowing for IFRS 9 and temporary treatment for certain FVOCI
instruments transitional arrangements
5. Pro forma for HFS
6. Calculated as NPEs net of provisions over net loans
Group Chief Executive Statement
"The first quarter of the year has been characterised by
economic growth, which we have supported, evidenced by a record
EUR618 mn of new loans extended. This has marked the third
consecutive quarter of accelerating loan growth. New lending
reached higher levels than the equivalent period pre-pandemic,
whilst maintaining strict lending criteria. Economic growth is
however expected to slow down to 2.7% for the year, impacted by
heightened geopolitical risks, before accelerating to 3.8% in 2023,
both in accordance with the Ministry of Finance Stability Programme
2022-2025. Increasing energy prices resulting in inflationary
pressures and global supply chain disruptions have been further
exacerbated following the outbreak of the war in Ukraine.
During the first quarter of the year, we generated total income
of EUR146 mn and a positive operating result of EUR50 mn. Despite
inflationary pressures, we kept our total operating expenses
(excluding levies and contributions) broadly flat in the quarter at
EUR86 mn, reflecting our on-going efforts to contain costs. Our
quarterly cost of risk increased modestly to 44 bps in the quarter,
reflecting the update in the macroeconomic outlook, but remaining
well within our normalised target range. We delivered a resilient
profit after tax and before non-recurring items of EUR27 mn, with a
corresponding return on tangible equity of 6.7%. The reported
result for the quarter was a net profit of EUR21 mn.
The Bank's capital position remains strong and comfortably in
excess of our regulatory requirements. As at 31 March 2022, our
Total Capital ratio was 20.3% and our CET1 ratio was 15.2%, on both
a transitional and pro forma basis. Our liquidity position also
remains strong and we continue to operate with over EUR6 bn surplus
liquidity and an LCR at 296%. Deposits on our balance sheet
increased by 1% in the quarter to EUR17.7 bn.
Balance sheet normalisation continued in the first quarter with
further c.EUR100 mn of organic NPE reduction, reducing our NPE
ratio to 6.5%, pro forma for NPE sales. We remain on track to
achieve our target NPE ratio of c.5% by the end of this year and
less than 3% by the end of 2025.
Our plan for the future is clear. We have a dynamic strategy in
place, leveraging our strong customer base and customer trust, our
market leadership position, and further developing digital
knowledge and infrastructure. As a consequence, we have a clear
focus on creating shareholder value and providing the foundations
for a return to dividend distributions. Since we shared our updated
medium term guidance in February this year, the external
environment has changed. As a result, we now expect to deliver a
higher return on tangible equity (ROTE) each year starting in 2023,
and to achieve a ROTE in excess of 10% a year ahead of plan."
Panicos Nicolaou
A. Group Financial Results - Underlying Basis
Unaudited Interim Condensed Consolidated Income Statement
---------------------------------------------------------------------------------
(1Q2022 vs
EUR mn 1Q2022 1Q2021 4Q2021 4Q2021) +% yoy +%
------------------------------------ ------ ------ ------ ----------- ------
Net interest income 71 76 73 -2% -7%
Net fee and commission income 44 39 44 0% 13%
Net foreign exchange gains
and net gains/(losses) on
financial instrument transactions
and disposal/dissolution
of subsidiaries and associates 6 2 10 -47% 124%
Insurance income net of
claims and commissions 16 13 18 -11% 24%
Net gains from revaluation
and disposal of investment
properties and on disposal
of stock of properties 5 2 5 13% 116%
Other income 4 4 4 2% 13%
------------------------------------ ------ ------ ------ ----------- ------
Total income 146 136 154 -5% 7%
------------------------------------ ------ ------ ------ ----------- ------
Staff costs (50) (50) (50) -2% -1%
Other operating expenses (36) (32) (37) -3% 11%
Special levy on deposits
and other levies/contributions (10) (9) (12) -16% 8%
Total expenses (96) (91) (99) -4% 5%
------ ------ ------ -----------
Operating profit 50 45 55 -7% 12%
------------------------------------ ------ ------ ------ ----------- ------
Loan credit losses (12) (20) (9) 24% -41%
Impairments of other financial
and non-financial assets (5) (5) (23) -77% -4%
(Provisions)/net reversals
for litigation, claims,
regulatory and other matters (0) (1) 8 - -72%
------------------------------------ ------ ------ ------ ----------- ------
Total loan credit losses,
impairments and provisions (17) (26) (24) -26% -34%
------------------------------------ ------ ------ ------ ----------- ------
Profit before tax and non-recurring
items 33 19 31 7% 76%
------------------------------------ ------ ------ ------ ----------- ------
Tax (6) (2) (2) 233% 193%
(Profit)/loss attributable
to non-controlling interests 0 (0) (2) - -
Profit after tax and before
non-recurring items (attributable
to the owners of the Company) 27 17 27 0% 65%
------ ------ ------ -----------
Advisory and other restructuring
costs - organic (1) (3) (3) -56% -52%
------------------------------------ ------ ------ ------ ----------- ------
Profit after tax - organic
(attributable to the owners
of the Company) 26 14 24 7% 87%
------------------------------------ ------ ------ ------ ----------- ------
Provisions/net loss relating
to NPE sales(1) (1) (2) (1) -43% -33%
Restructuring and other
costs relating to NPE sales(1) (1) (4) 3 - -86%
Restructuring costs - Voluntary
Staff Exit Plan (VEP) (3) - (16) -81% -
Profit after tax (attributable
to the owners of the Company) 21 8 10 110% 162%
------ ------ ------ -----------
A. Group Financial Results - Underlying Basis (continued)
Unaudited Interim Condensed Consolidated Income Statement - Key Performance
Ratios
-----------------------------------------------------------------------------------------
(1Q2022
vs 4Q2021)
Key Performance Ratios(2) 1Q2022 1Q2021 4Q2021 +% yoy +%
---------------------------------------- ------- ------ ------ ----------- ---------
Net Interest Margin (annualised) 1.32% 1.63% 1.34% -2 bps -31 bps
---------------------------------------- ------- ------ ------ ----------- ---------
Cost to income ratio 66% 67% 65% +1 p.p. -1 p.p.
---------------------------------------- ------- ------ ------ ----------- ---------
Cost to income ratio excluding
special levy on deposits and
other levies/contributions 59% 60% 57% +2 p.p. -1 p.p.
---------------------------------------- ------- ------ ------ ----------- ---------
Operating profit return on
average assets (annualised) 0.8% 0.8% 0.9% -0.1 p.p. -
---------------------------------------- ------- ------ ------ ----------- ---------
Basic earnings per share attributable
to the owners of the Company
(EUR cent) 4.78 1.83 2.27 2.51 2.95
---------------------------------------- ------- ------ ------ ----------- ---------
Basic earnings after tax and
before non-recurring items
per share attributable to
the owners of the Company
(EUR cent) 6.20 3.75 6.19 0.01 2.45
---------------------------------------- ------- ------ ------ ----------- ---------
Return on tangible equity
(ROTE) after tax and before
non-recurring items (annualised) 6.7% 4.1% 6.6% +0.1 p.p. +2.6 p.p.
---------------------------------------- ------- ------ ------ ----------- ---------
1. 'Provisions/net loss relating to NPE sales' refer to the net loss on
transactions completed during the year/period and the net loan credit losses
on transactions under consideration, whilst 'Restructuring and other costs
relating to NPE sales' refer mainly to the costs relating to these trades.
For further details please refer to Section A.2.4. 2. Including the NPE
portfolios classified as "Non-current assets and disposal groups held for
sale", where relevant .
p.p. = percentage points, bps = basis points, 100 basis points (bps) = 1
percentage point
A. Group Financial Results - Underlying Basis (continued)
Unaudited Interim Condensed Consolidated Balance Sheet
============================================================================================================
EUR mn 31.03.2022 31.12.2021 + %
======================================== ================ ================== ============================
Cash and balances with central
banks 9,330 9,231 1%
Loans and advances to banks 313 292 7%
Debt securities, treasury bills
and equity investments 2,066 2,139 -3%
Net loans and advances to customers 10,004 9,836 2%
Stock of property 1,083 1,112 -3%
Investment properties 102 118 -14%
Other assets 1,866 1,876 0%
Non-current assets and disposal
groups held for sale 353 359 -2%
======================================== ================ ================== ============================
Total assets 25,117 24,963 1%
======================================== ================ ================== ============================
Deposits by banks 533 457 17%
Funding from central banks 2,962 2,970 0%
Customer deposits 17,660 17,531 1%
Loan stock 611 643 -5%
Other liabilities 1,260 1,281 -2%
======================================== ================ ================== ============================
Total liabilities 23,026 22,882 1%
======================================== ================ ================== ============================
Shareholders' equity 1,849 1,839 1%
======================================== ================ ================== ============================
Other equity instruments 220 220 -
======================================== ================ ================== ============================
Total equity excluding non-controlling
interests 2,069 2,059 1%
======================================== ================ ================== ============================
Non-controlling interests 22 22 -1%
======================================== ================ ================== ============================
Total equity 2,091 2,081 0%
======================================== ================ ================== ============================
Total liabilities and equity 25,117 24,963 1%
======================================== ================ ================== ============================
Key Balance Sheet figures and
ratios 31.03.2022 31.03.2022 31.12.2021 + (2)
(pro forma)(1) (as reported)(2) (as reported)(2)
======================================== ================ ================== ================== ========
Gross loans (EUR mn) 10,389 10,964 10,856 1%
======================================== ================ ================== ================== ========
Allowance for expected loan
credit losses (EUR mn) 406 734 792 -7%
======================================== ================ ================== ================== ========
Customer deposits (EUR mn) 17,660 17,660 17,531 1%
======================================== ================ ================== ================== ========
Loans to deposits ratio (net) 57% 58% 57% +1 p.p.
======================================== ================ ================== ================== ========
NPE ratio 6.5% 11.4% 12.4% -1 p.p.
======================================== ================ ================== ================== ========
NPE coverage ratio 60% 59% 59% -
======================================== ================ ================== ================== ========
Leverage ratio 7.6% 7.6% 7.6% -
======================================== ================ ================== ================== ========
Capital ratios and risk weighted
assets 31.03.2022 31.03.2022 31.12.2021 + (2)
(pro forma)(1) (as reported)(2) (as reported)(2)
======================================== ================ ================== ================== ========
Common Equity Tier 1 (CET1)
ratio (transitional)(3) 15.2% 14.6% 15.1% -50 bps
======================================== ================ ================== ================== ========
Total capital ratio 20.3% 19.6% 20.0% -40 bps
======================================== ================ ================== ================== ========
Risk weighted assets (EUR mn) 10,214 10,559 10,694 -1 %
======================================== ================ ================== ================== ========
1. Pro forma for HFS (please refer to 'Commentary on Underlying Basis').
2. Including the NPE portfolios classified as "Non-current assets
and disposal groups held for sale", where relevant. 3. The CET1 fully
loaded ratio as at 31 March 2022 amounts to 13.9% and 14.5% pro forma
for HFS (compared to 13.7% and 14.3% pro forma for HFS as at 31 December
2021). p.p. = percentage points, bps = basis points, 100 basis points
(bps) = 1 p.p.
A. Group Financial Results - Underlying Basis (continued)
Commentary on Underlying Basis
The financial information presented in this Section provides an
overview of the Group financial results for the quarter ended 31
March 2022 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 one-off
items.
Reconciliations between the statutory basis and the underlying
basis are included in Section F.1 'Reconciliation of interim income
statement between statutory and underlying basis' and in Section H.
'Definitions & Explanations', to facilitate the comparability
of the underlying basis to the statutory information.
Please note the following in relation to the disclosure of pro
forma figures and ratios throughout this announcement.
References to pro forma figures and ratios as at 31 March 2022
(and 31 December 2021) refer to Project Helix 3 and Project Sinope.
They are based on 31 March 2022 (and 31 December 2021) underlying
basis figures respectively, unless otherwise stated, and assume
their completion, currently expected to occur in 2H2022 and 2Q2022
respectively, which remain subject to customary regulatory and
other approvals. As at 31 March 2022 (and 31 December 2021), the
portfolios of loans, as well as the real estate properties included
in Project Helix 3 and Project Sinope, were classified as disposal
groups held for sale.
Any references to pro forma figures and ratios as at 31 March
2021 refer to Project Helix 2. As at 31 March 2021, the portfolios
of loans included in Project Helix 2 were classified as a disposal
group held for sale.
Where numbers are provided on a pro forma basis, this is stated
and referred to as 'Pro forma for held for sale' or 'Pro forma for
HFS'.
Project Helix 2 refers to the sale of portfolios of loans with a
total gross book value of EUR1.3 bn on completion, secured over
real estate collateral, to funds affiliated with Pacific Investment
Management Company LLC ("PIMCO"), the agreements for which were
announced on 3 August 2020 and on 18 January 2021. Project Helix 2
sale was completed in June 2021.
Project Helix 3 refers to the agreement the Group reached in
November 2021 with funds affiliated with PIMCO, for the sale of a
portfolio of NPEs with gross book value of EUR568 mn, as well as
real estate properties with book value of c.EUR120 mn, as at 30
September 2021.
Project Sinope refers to the agreement the Group reached in
December 2021 for the sale of a portfolio of NPEs with gross book
value of EUR12 mn, as well as properties in Romania with carrying
value EUR0.6 mn, as at 31 December 2021.
Further details on the NPE trades are provided in Section A.1.5
'Loan portfolio quality'.
A. Group Financial Results - Underlying Basis (continued)
A.1. Balance Sheet Analysis
A.1.1 Capital Base
Total equity excluding non-controlling interests totalled
EUR2,069 mn at 31 March 2022, compared to EUR2,059 mn at 31
December 2021 . Shareholders' equity totalled EUR1,849 mn at 31
March 2022, compared to EUR1,839 mn at 31 December 2021.
The Common Equity Tier 1 capital (CET1) ratio on a transitional
basis stood at 14.6% as at 31 March 2022 and 15.2% pro forma for
held for sale portfolios (referred to as 'pro forma for HFS'),
compared to 15.1% as at 31 December 2021 (and 15.8% pro forma for
HFS). During 1Q2022, the CET1 ratio was positively affected mainly
by the pre-provision income and the decrease in risk-weighted
assets (RWA), and negatively affected mainly by the phasing-in of
IFRS 9 and other transitional arrangements, provisions and
impairments and other movements. Throughout this announcement, the
capital ratios (and pro forma capital ratios) as at 31 March 2022
include unaudited/unreviewed profits for 1Q2022, unless otherwise
stated.
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 back to CET1 each year decreases based on a weighting factor
until the impact of IFRS 9 is fully absorbed at the end of the five
years. The impact on the capital position for year 2018 was 5% of
the impact on the impairment amount from the initial application of
IFRS 9, increased to 15% (cumulative) for year 2019, 30%
(cumulative) for year 2020, 50% (cumulative) for year 2021 and 75%
(cumulative) for year 2022. This will be fully phased-in (100%) by
1 January 2023. The phasing-in of the impairment amount from the
initial application of IFRS 9 had a negative impact of c.60 bps on
the CET1 ratio on 1 January 2022.
The CET1 ratio on a fully loaded basis amounted to 13.9% as at
31 March 2022 and 14.5% pro forma for HFS, compared to 13.7% as at
31 December 2021 (and 14.3% pro forma for HFS) . 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 19.6% as at 31 March 2022 (and
20.3% pro forma for HFS), compared to 20.0% as at 31 December 2021
(and 20.8% pro forma for HFS).
The Group's capital ratios are above the Supervisory Review and
Evaluation Process (SREP) requirements.
In the context of the annual SREP conducted by the European
Central Bank (ECB) in 2021, and based on the final 2021 SREP
Decision received in February 2022, the Pillar II requirement has
been set at 3.26%, compared to the previous level of 3.00%. The
additional Pillar II requirement add-on of 0.26% relates to ECB's
prudential provisioning expectations as per the 2018 ECB Addendum
and subsequent ECB announcements and press release in July 2018 and
August 2019. This component of the Pillar II requirement add-on
takes into consideration Project Helix 3. It is dynamic and can be
reduced during 2022 on the basis of in-scope NPEs and level of
provisioning.
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 Bank has been designated as an O-SII and the
O-SII buffer was initially set by the CBC at 2.00%. This buffer is
being phased-in gradually, having started from 1 January 2019 at
0.50% and increasing by 0.50% every year thereafter, until being
fully implemented (2.00%). In April 2020, the CBC decided to delay
the phasing-in (0.50%) 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. In November 2021, the Bank received notification
from the CBC that the total O-SII buffer is reduced by 50 bps to
1.50%, therefore the phasing-in of the O-SII buffer on 1 January
2022 and 1 January 2023 has been revised to 0.25% for each
period.
As a result, the Group's minimum phased-in CET1 capital ratio
has been set at 10.08% compared to the previous level of 9.69%
(comprising a 4.50% Pillar I requirement, a 1.83% Pillar II
requirement, the Capital Conservation Buffer of 2.50% and the O-SII
Buffer of 1.25%) and the Group's Total Capital requirement was set
at 15.01% compared to the previous level of 14.50% (comprising an
8.00% Pillar I requirement, of which up to 1.50% can be in the form
of AT1 capital and up to 2.00% in the form of T2 capital, a 3.26%
Pillar II requirement, the Capital Conservation Buffer of 2.50% and
the O-SII Buffer of 1.25%). The ECB has also provided revised lower
non-public guidance for an additional Pillar II CET1 buffer (P2G).
Pillar II add-on capital requirements derive from the SREP, which
is a point in time assessment, and are therefore subject to change
over time. The new SREP requirements are effective as from 1 March
2022. The Group's CET1 and Total Capital ratio remain above the new
requirements.
Own funds held for the purposes of P2G 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.
A. Group Financial Results - Underlying Basis (continued)
A.1. Balance Sheet Analysis (continued)
A.1.1 Capital Base (continued)
Based on the SREP decision of prior years, the Company (Bank of
Cyprus Holdings PLC) and the Bank are under a regulatory
prohibition for equity dividend distribution and hence no dividends
were declared or paid during 2021. Following the final 2021 SREP
Decision received in February 2022, the Company and the Bank still
remain under equity dividend distribution prohibition for 2022.
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. Following the final 2021 SREP Decision, the previous
restriction on variable pay was lifted.
The ECB, as part of its supervisory role, completed an onsite
inspection and review on the value of the Group's foreclosed assets
with reference date 30 June 2019. The findings related to a
prudential charge which will decrease based on the Bank's progress
in disposing the properties in scope. The amount is being directly
deducted from own funds since 30 June 2021. There is no significant
movement in the amount deducted since 31 December 2021. As a result
of the prudential charge deducted from own funds as at 31 March
2022, the impact on the Group's CET1 ratio i s 36 bps.
The Group is participating in the 2022 ECB supervisory Climate
Risk Stress Test and participated in the 2021 ECB SREP Stress Test.
For further information please refer to the 'Additional Risk and
Capital Management Disclosures' of the 'Annual Financial Report
2021'.
Project Helix 3
In November 2021, the Group reached agreement for the sale of a
portfolio of NPEs with gross book value of EUR568 mn as at 30
September 2021, as well as real estate properties with book value
of c.EUR120 mn as at 30 September 2021, known as Project Helix 3.
Further details are provided in Section A.1.5 'Loan portfolio
quality'.
The capital impact of Project Helix 3 on the Group's CET1 ratio
was an increase of 8 bps as at 30 September 2021. Overall, by
completion (currently expected to occur in 2H2022), and including
the positive impact already recorded in the income statement for
3Q2021, the transaction is expected to have a total positive impact
of c.70 bps on the Group's CET1 ratio on the basis of 31 March 2022
figures.
Pro forma calculations are based on 31 March 2022 financial
results, unless otherwise stated, and assume completion of the
transaction, which remains subject to customary regulatory and
other approvals.
Project Helix 2
In June 2021, the Company completed Project Helix 2 (Portfolios
A and B), which refers to the sale of portfolios of loans with a
total gross book value of EUR1,331 mn on completion (of which
EUR1,305 mn relate to non-performing exposures), secured over real
estate collateral, the agreements for which were announced on 3
August 2020 and on 18 January 2021. Further details are provided in
Section A.1.5 'Loan portfolio quality'.
The capital impact of Project Helix 2 on the Group's CET1 ratio
during 2Q2021 was an increase of c.20 bps, of which c.10 bps arose
on completion. Post completion, upon the full payment of the
deferred consideration, the transaction was expected to have an
additional positive capital impact of c.64 bps on the Group's CET1
ratio on the basis of 30 June 2021 figures and without taking into
consideration any positive impact from the earnout, thus making the
transaction overall capital accretive. The first instalment of the
deferred consideration was received in December 2021.
A. Group Financial Results - Underlying Basis (continued)
A.1. Balance Sheet Analysis (continued)
A.1.1 Capital Base (continued)
Tier 2 Capital Notes
In April 2021, the Company issued EUR300 mn unsecured and
subordinated Tier 2 Capital Notes (the 'New T2 Notes').
Immediately after, the Company and the Bank entered into an
agreement pursuant to which the Company on-lent to the Bank the
entire EUR300 mn proceeds of the issue of the New T2 Notes (the
'Tier 2 Loan') on terms substantially identical to the terms and
conditions of the New T2 Notes. The Tier 2 Loan constitutes an
unsecured and subordinated obligation of the Bank.
The New T2 Notes were priced at par with a fixed coupon of
6.625% per annum, payable annually in arrears and resettable on 23
October 2026. The maturity date for the New T2 Notes is 23 October
2031. The Company will have the option to redeem the New T2 Notes
early on any day during the six-month period from 23 April 2026 to
23 October 2026, subject to applicable regulatory consents.
At the same time, the Bank invited the holders of its EUR250 mn
Fixed Rate Reset Tier 2 Capital Notes due January 2027 (the 'Old T2
Notes') to tender their Old T2 Notes for purchase by the Bank at a
price of 105.50%, after which Old T2 Notes of EUR43 mn remained
outstanding.
On 19 January 2022, the Bank exercised its option and redeemed
the outstanding EUR43 mn Old T2 Notes.
Following the highly successful Tier 2 refinancing in 2021, the
Group continues to monitor opportunities for the optimisation of
its capital position, including Additional Tier 1 capital.
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 Capital Requirements Directive
(CRD) IV in January 2014 and its subsequent phasing-in led to a
more capital-intensive treatment of this DTA for the Bank. With
this legislation, institutions are allowed to treat such DTAs as
'not relying on profitability', according to CRD IV and as a result
not deducted from CET1, hence improving a credit institution's
capital position.
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. 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, and also
allowing for a higher amount to be charged in the year the
amendments are effective. 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 EUR5.3 mn was recorded in
4Q2021 and FY2021, bringing the total amount provided by the Group
for such increased fee to EUR21 mn.
A. Group Financial Results - Underlying Basis (continued)
A.1. Balance Sheet Analysis (continued)
A.1.2. Regulations and Directives
A.1.2.1 Revised rules on capital and liquidity (CRR II and CRD
V)
On 27 June 2019, the revised rules on capital and liquidity
(Regulation (EU) 2019/876 (Capital Requirements Regulation, CRR II)
and Directive (EU) 2019/878 (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 were
required to transpose the CRD V into national law. CRD V was
transposed and implemented in Cyprus law in early May 2021. Certain
provisions took immediate effect (primarily relating to Minimum
Requirement for Own Funds and Eligible Liabilities, MREL), and most
changes became effective as of June 2021. The key changes
introduced consist of, among others, changes to qualifying criteria
for CET1, AT1 and Tier 2 instruments, introduction of MREL
requirements and binding Leverage Ratio (as defined in the CRR) and
Net Stable Funding Ratio (NSFR) requirements.
Some of the amendments were introduced in June 2020 as part of
the "CRR quick-fix" which brought forward certain CRR II changes in
light of the challenges posed to the banking sector by the COVID-19
pandemic. The key measures in the CRR quick fix include an
extension of the IFRS 9 transitional arrangements for the dynamic
component by 2 years, the introduction of a prudential filter on
exposures to central governments, regional governments or local
authorities at FVOCI, the acceleration of CRR II amendments to
exempt certain software assets from capital deduction and to revise
the SME discount factors.
A.1.2.2 The 2021 Banking Package (CRR III and CRD VI and
BRRD)
In October 2021, the European Commission adopted legislative
proposals for further amendments to Capital Requirements Regulation
(CRR), CRD IV and the BRRD (the "2021 Banking Package"). Amongst
other things, the 2021 Banking Package would implement certain
elements of Basel III that have not yet been transposed into EU
law. The 2021 Banking Package is subject to amendment in the course
of the EU's legislative process; and its scope and terms may change
prior to its implementation. In addition, in the case of the
proposed amendments to CRD IV and the BRRD, their terms and effect
will depend, in part, on how they are transposed in each member
state. As a general matter, it is likely to be several years until
the 2021 Banking Package begins to be implemented (currently
expected in 2025); and certain measures are expected to be subject
to transitional arrangements or to be phased in over time.
A.1.2.3 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 was
required to be transposed into national law. BRRD II was transposed
and implemented in Cyprus law in early May 2021. 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 December 2021, the Bank received notification from the Single
Resolution Board (SRB) of the final 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 decision, the final MREL requirement was set at
23.74% of risk weighted assets and 5.91% of Leverage Ratio Exposure
(LRE) (as defined in the CRR) and must be met by 31 December 2025.
Furthermore, an interim requirement to be met by 1 January 2022 was
set at 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. The Bank must comply with the
MREL requirement at the consolidated level, comprising the Bank and
its subsidiaries.
In June 2021, the Bank executed its inaugural MREL transaction
issuing EUR300 mn of senior preferred notes (the "SP Notes"). The
SP Notes were priced at par with a fixed coupon of 2.50% per annum,
payable annually in arrears and resettable on 24 June 2026. The
maturity date of the SP Notes is 24 June 2027 and the Bank may, at
its discretion, redeem the SP Notes on 24 June 2026, subject to
meeting certain conditions as specified in the Terms and
Conditions, including applicable regulatory consents. The SP Notes
comply with the criteria for MREL and contribute towards the Bank's
MREL requirements.
A. Group Financial Results - Underlying Basis (continued)
A.1. Balance Sheet Analysis (continued)
A.1.2. Regulations and Directives (continued)
A.1.2.3 Bank Recovery and Resolution Directive (BRRD)
(continued)
Minimum Requirement for Own Funds and Eligible Liabilities
(MREL) (continued)
The MREL ratio of the Bank as at 31 March 2022, calculated
according to the SRB's eligibility criteria currently in effect and
based on the Bank's internal estimate, stood at 18.69% of risk
weighted assets (RWA) and at 9.54% of LRE. Pro forma for HFS, the
MREL ratio of the Bank as at 31 March 2022, calculated on the same
basis, stood at 19.53% of risk weighted assets. The MREL ratio
expressed as a percentage of risk weighted assets does not include
capital used to meet the CBR amount, which stood at 3.5% until 31
December 2021, increased to 3.75% on 1 January 2022 and is expected
to increase to 4.0% on 1 January 2023. Throughout this
announcement, t he MREL ratios (and MREL ratios pro forma for HFS)
as at 31 March 2022 include unaudited/unreviewed profits for
1Q2022, unless otherwise stated.
The successful Tier 2 capital refinancing in April 2021 and the
inaugural issuance of MREL-compliant senior notes in June 2021 mark
the foundation for the Bank's plan to meet applicable MREL
requirements. The interim MREL requirement as at 1 January 2022 has
been satisfied, and the Bank will continue to evaluate
opportunities to advance the build-up of its MREL liabilities.
A.1.3 Funding and Liquidity
Funding
Funding from Central Banks
At 31 March 2022, the Bank's funding from central banks amounted
to EUR2,962 mn, which relates to ECB funding, comprising solely of
funding through the Targeted Longer-Term Refinancing Operations
(TLTRO) III, compared to EUR2,970 mn as at 31 December 2021.
In June 2021 the Bank borrowed an amount of EUR300 mn under the
eighth TLTRO III operation, increasing the borrowing under TLTRO
III to EUR3.0 bn, as the Bank had already borrowed an amount of
EUR1.7 bn under the seventh TLTRO III operation in March 2021 and
an amount of EUR1 bn under the fourth TLTRO III operation in June
2020, despite its comfortable liquidity position, given the
favourable borrowing terms, in combination with the relaxation of
collateral requirements.
The Bank exceeded the benchmark net lending threshold in the
period 1 March 2020 - 31 March 2021 and qualified for the
beneficial rate of -1% for the period from June 2020 to June 2021.
The NII benefit from its TLTRO III borrowing for the period from
June 2020 to June 2021 stood at c.EUR7 mn and was recognised over
the respective period in the income statement.
Based on internal estimations (subject to confirmation from the
CBC), the Bank has also exceeded the benchmark net lending
threshold in the period 1 October 2020 - 31 December 2021 and is
therefore expected to qualify for a beneficial rate for the period
from June 2021 to June 2022. The Bank estimates the NII benefit
from its TLTRO III borrowing for the period from June 2021 to June
2022 at c.EUR15 mn, recognised over the respective period in the
income statement.
Deposits
Customer deposits totalled EUR17,660 mn at 31 March 2022
(compared to EUR17,531 mn at 31 December 2021) and increased by 1%
in the first quarter.
The Bank's deposit market share in Cyprus reached 35.8% as at 31
March 2022, compared to 34.8% as at 31 December 2021. Customer
deposits accounted for 70% of total assets and 77% of total
liabilities at 31 March 2022 (at the same levels as at 31 December
2021).
The net Loans to Deposits (L/D) ratio stood at 58% as at 31
March 2022 (compared to 57% as at 31 December 2021 on the same
basis). Pro forma for HFS, the L/D ratio as at 31 March 2022 stood
at 57%.
A. Group Financial Results - Underlying Basis (continued)
A.1. Balance Sheet Analysis (continued)
A.1.3 Funding and Liquidity (continued)
Funding (continued)
Loan Stock
At 31 March 2022, the Group's loan stock (including accrued
interest) amounted to EUR611 mn (compared to EUR643 mn at 31
December 2021) and relates to unsecured subordinated Tier 2 Capital
Notes and senior preferred notes.
For further information please refer to Sections A.1.1 'Capital
Base' and A .1.2.3 'Bank Recovery and Resolution Directive (BRRD) /
Minimum Requirement for Own Funds and Eligible Liabilities (MREL)',
respectively.
Liquidity
At 31 March 2022, the Group Liquidity Coverage Ratio (LCR) stood
at 296% (compared to 298% at 31 December 2021), above the minimum
regulatory requirement of 100%. The liquidity surplus in LCR at 31
March 2022 amounted to EUR6.4 bn (compared to EUR6.3 bn at 31
December 2021). The increase in 1Q2022 is mainly driven by the
increase in customer deposits.
At 31 March 2022, the Group Net Stable Funding Ratio (NSFR)
stood at 145% (compared to 147% at 31 December 2021), above the
minimum regulatory requirement of 100%, enforced in June 2021 as
per CRR II.
A.1.4 Loans
Group gross loans (inclusive of those classified as held for
sale) totalled EUR10,964 mn at 31 March 2022 , compared to
EUR10,856 mn at 31 December 2021, increased by 1% since the
beginning of the year.
New lending granted in Cyprus reached a record EUR618 mn for
1Q2022 (compared to EUR471 mn for 4Q2021 and EUR487 mn for 1Q2021)
up by 31% qoq and 27% yoy, reaching higher levels than the
equivalent period pre-pandemic (1Q2019), whilst maintaining strict
lending criteria. The qoq increase is driven by increases in
lending activity across corporate, shipping and international, SME
and non-housing retail. New lending in 1Q2022 comprised EUR254 mn
of corporate loans, EUR196 mn of retail loans (of which EUR128 mn
were housing loans), EUR64 mn of SME loans and EUR104 mn of
shipping and international loans. New corporate loans in 1Q2022
have increased by 18% qoq, as the economic activity continues to
improve.
At 31 March 2022, the Group net loans and advances to customers
(excluding those classified as held for sale) totalled EUR10,004 mn
(compared to EUR9,836 mn at 31 December 2021).
In addition, at 31 March 2022 net loans and advances to
customers of EUR248 mn were classified as held for sale in line
with IFRS 5 of which EUR241 mn related to Project Helix 3 and EUR7
mn to Project Sinope (see below), compared to EUR250 mn as at 31
December 2021 of which EUR243 mn related to Project Helix 3 and
EUR7 mn to Project Sinope.
The Bank is the single largest credit provider in Cyprus with a
market share of 41.9% at 31 March 2022, compared to 38.8% at 31
December 2021. The increase in 1Q2022 is mainly due to a reduction
in loans in the banking system.
A.1.5 Loan portfolio quality
The Group has continued to make steady progress across all asset
quality metrics. As the balance sheet de-risking is largely
complete, t he Group's priorities include maintaining high quality
new lending and normalising the cost of risk and other
impairments.
The loan credit losses for 1Q2022 totalled EUR12 mn (excluding
'Provisions/net loss relating to NPE sales'), compared to EUR9 mn
for 4Q2021 and EUR20 mn for 1Q2021. Further details regarding loan
credit losses are provided in Section A.2.3 'Profit before tax and
non-recurring items'.
While defaults have been limited, the additional monitoring and
provisioning for sectors vulnerable under COVID-19 remain in place
to ensure that potential difficulties in the repayment ability are
identified at an early stage, and appropriate solutions are
provided to viable customers. In addition, the Group has enhanced
its monitoring to sectors, such as tourism, that are impacted from
the consequences of the Ukrainian crisis (as further discussed in
the Section B. Operating Environment and Section C. Business
Overview below).
The Group will continue to monitor the situation, so that any
changes arising from the uncertainty on the macroeconomic outlook
and geopolitical developments, impacted by the implications of the
Russian invasion of Ukraine, as well as the degree of recurrence of
the COVID-19 disease due to virus mutations, and the persistent
positive effect of fiscal and monetary policy, are timely
captured.
A. Group Financial Results - Underlying Basis (continued)
A.1. Balance Sheet Analysis (continued)
A.1.5 Loan portfolio quality (continued)
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. The payment holiday for all these loans
expired on 31 December 2020.
P erforming loans as at 31 March 2022 under expired payment
deferrals amounted to EUR4.51 bn (compared to EUR4.60 bn as at 31
December 2021), of which EUR4.49 bn had an instalment due by 11 May
2022 with a strong performance; 96% presented no arrears (of which
c.EUR0.73 bn have been restructured until 11 May 2022) and only 4%
(EUR190 mn) are in arrears (of which EUR180 mn are less than 30
days-past-due). 65% of restructurings took place in 1H2021.
In 1Q2022, net reclassifications of EUR35 mn of loans under
expired payment deferrals were made from Stage 2 to Stage1, mainly
due to improved performance and updated financial information. In
addition, net reclassifications of c.EUR5 mn of loans under expired
payment deferrals were made mainly from Stage 2 to Stage 3 in
1Q2022. References made to 'loans under expired payment deferrals'
in this paragraph include current accounts and overdrafts.
Following continuing signs of recovery, the majority of COVID-19
related management overlays applied until 30 June 2021 were
subsequently removed in 2H2021, as a result of stronger than
expected economic performance. The cost of risk for 4Q2021 and
1Q2022 did not include any charge or reversal of loan impairments
relating to COVID-19 overlays. Overall, a net reversal of loan
impairments relating to COVID-19 (including related impact on
macroeconomic assumptions) amounting to c.EUR5 mn (4 bps) are
included in FY2021 loan credit losses of EUR66 mn (annualised cost
of risk of 0.57%). The cost of risk for 1Q2022 of 44 bps (EUR12 mn)
includes 20 bps (c.EUR 5 mn) reflecting the update in macroeconomic
outlook and management overlays on sectors (such as tourism and
private individuals) expected to be impacted by the crisis in
Ukraine and the heightened inflationary pressures. Further details
on the cost of risk are provided in Section A.2.3 'Profit before
tax and non-recurring items'.
Close monitoring of the credit quality of these loans continues
and customers with early arrears are offered solutions. The Bank
has a strong track record in dealing with restructurings. Targeted
restructuring solutions are offered to alleviate pandemic-related
short-term cash flow burden, following rigorous assessment of
repayment ability. To date, most restructurings relate to the
tourism sector.
As at 31 March 2022, the Group's non-legacy loan book exposure
to tourism was limited to EUR1.17 bn (out of a total non-legacy
loan book of EUR9.75 bn), of which c.EUR0.87 bn of performing loans
as at 31 March 2022 were under expired payment deferrals. 99% of
those had an instalment due by 11 May 2022 and of those almost all
presented no arrears (of which c.EUR350 mn have been restructured
until 11 May 2022 and 80% of these restructurings took place in
1H2021).
Tourism performance in 2021 was better than initially
anticipated. There was a steady monthly recovery of tourist
arrivals, as the tourism season extended until October 2021.
Tourist arrivals in 1Q2022 reached 70% of corresponding levels in
1Q2019. I t is important to note, that the majority of
'accommodation' customers entered the crisis with significant
liquidity, following strong performance in recent years and that
98% of the tourism sector portfolio is secured by property.
The crisis in Ukraine may have an adverse impact on the Cypriot
economy, partly due to a negative impact on tourism. This impact
will depend on the duration and severity of the crisis which remain
uncertain at this stage. In response, the Government is working to
replace one third of the expected lost tourist arrivals from Russia
and Ukraine (which amounted to c.20% of 2019 levels) with arrivals
from other markets, such as Belgium, Switzerland and Scandinavia.
Close monitoring of exposures to the tourism sector is enhanced and
the Group remains in close contact with customers to offer
solutions as necessary. For further details on the Ukrainian
crisis, please refer to Section C. 'Business Overview'.
For further information please refer to the presentation for the
Group Financial Results for the quarter ended 31 March 2022 (slide
37).
A. Group Financial Results - Underlying Basis (continued)
A.1. Balance Sheet Analysis (continued)
A.1.5 Loan portfolio quality (continued)
Non-performing exposure reduction
Non-performing exposures (NPEs) as defined by the European
Banking Authority (EBA) were reduced by EUR96 mn, or 7%, in 1Q2022
(compared to a reduction of EUR105 mn in 4Q2021) to EUR1,247 mn at
31 March 2022 (compared to EUR1,343 mn at 31 December 2021). Pro
forma for HFS, NPEs are reduced by a further EUR572 mn to EUR675 mn
on the basis of 31 March 2022 figures.
The NPEs account for 11.4% of gross loans as at 31 March 2022,
compared to 12.4% as at 31 December 2021, on the same basis, i.e.
including the NPE portfolios classified as 'Non-current assets and
disposal groups held for sale'. Pro forma for HFS, the NPE ratio is
reduced to 6.5% on the basis of 31 March 2022 figures.
The NPE coverage ratio stands at 59% at 31 March 2022, at the
same level as at 31 December 2021 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 HFS, NPE
coverage ratio is 60% on the basis of 31 March 2022 figures.
As of 1 January 2021, the new regulation on Definition of
Default was implemented, affecting NPE exposures and the
calculation of Days-Past-Due (please refer to Section H.
Definitions & Explanations for the changes in the
definition).
31.03.2022 31.03.2022 31.12.2021 31.12.2021
Pro forma for Pro forma for
HFS HFS
EUR mn % gross EUR mn % gross EUR mn % gross EUR mn % gross
loans loans loans loans
------- -------- ------- -------- ------- -------- ------- --------
NPEs as per
EBA definition 675 6.5% 1,247 11.4% 771 7.5% 1,343 12.4%
Of which,
in pipeline
to exit:
-NPEs with
forbearance
measures,
no arrears(1) 138 1.3% 148 1.4% 142 1.4% 152 1.4%
------- -------- ------- -------- ------- -------- ------- --------
1. The analysis is performed on a customer basis.
Project Helix 3
In November 2021, the Group reached agreement for the sale of a
portfolio of NPEs with gross book value of EUR568 mn as at 30
September 2021, as well as real estate properties with book value
of c.EUR120 mn as at 30 September 2021, to funds affiliated with
Pacific Investment Management Company LLC (PIMCO), known as Project
Helix 3. This portfolio of loans had a contractual balance of
EUR993 mn as at the reference date of 31 May 2021 and comprises
c.20,000 loans, mainly to retail clients. As at 31 March 2022 and
31 December 2021, this portfolio of loans, as well as the real
estate properties included in Helix 3, were classified as a
disposal group held for sale. At completion, currently expected to
occur in 2H2022, the Bank will receive gross cash consideration of
c.EUR385 mn.
This portfolio of loans (as well as the real estate properties
included in Helix 3) will be transferred to a licensed Cypriot
Credit Acquiring Company (the "CyCAC") by the Bank. The shares of
the CyCAC will then be acquired by certain funds affiliated with
Pacific Investment Management Company LLC (PIMCO), the purchaser of
the portfolio.
Following a transitional period where servicing will be retained
by the Bank, it is intended that the servicing of the portfolio of
loans and the real estate properties included in Helix 3 will be
carried out by a third party servicer selected and appointed by the
purchaser.
Project Helix 3 represents a milestone in the delivery of one of
the Group's core strategic priorities of improving asset quality
through the reduction of NPEs. Pro forma for HFS, the Group's NPE
ratio is in mid-single digit. Helix 3 reduced the stock of NPEs by
46% to EUR675 mn pro forma on the basis of 31 March 2022 figures,
and its NPE ratio by c.5 p.p., to 6.5% pro forma on the basis of 31
March 2022 figures.
All relevant figures and pro forma calculations are based on 31
March 2022 financial results, unless otherwise stated, and assume
completion of the transaction, which remains subject to customary
regulatory and other approvals.
A. Group Financial Results - Underlying Basis (continued)
A.1. Balance Sheet Analysis (continued)
A.1.5 Loan portfolio quality (continued)
Project Helix 2
In June 2021, the Company completed Project Helix 2 (Portfolios
A and B), which refers to the sale of portfolios of loans with a
total gross book value of EUR1,331 mn as at the completion date (of
which EUR1,305 mn relate to non-performing exposures) (Portfolios A
and B) secured over real estate collateral, and stock of properties
with carrying value amounting to EUR73 mn, to funds affiliated with
Pacific Investment Management Company LLC (PIMCO), the agreements
for which were announced on 3 August 2020 and on 18 January 2021.
The Bank retained the servicing of these Portfolios for a
transitional period to the end of 3Q2021, against a servicing
fee.
The consideration for the sale amounts to c.EUR560 mn, of which
c.EUR165 mn were received in cash by completion. The remaining
amount is payable in four instalments up to December 2025 without
any conditions attached, of which c.EUR85 mn were received in
December 2021 . The consideration can be increased through an
earnout arrangement, depending on the performance of each of the
Portfolios.
Project Helix 2 represents another milestone in the delivery of
one of the Group's strategic priorities of improving asset quality
through the reduction of NPEs. Project Helix 2 (Portfolios A and B)
reduced the NPE ratio by c.9 percentage points, on the basis of 30
June 2021 figures.
Project Sinope
In December 2021, the Bank entered into an agreement for the
sale of a portfolio of NPEs, with a contractual balance of EUR146
mn and a gross book value of EUR12 mn as at 31 December 2021, as
well as properties in Romania with carrying value EUR0.6 mn as at
31 December 2021 (known as 'Project Sinope'). The sale is subject
to the necessary approvals and is expected to be completed by the
end of 2Q2022. The portfolio has been classified as held for sale
since 31 December 2021.
O verall, since the peak in 2014 and pro forma for HFS, the
stock of NPEs has been reduced by EUR14.3 bn or 95% to less than
EUR0.7 bn and the NPE ratio by over 56 percentage points, from 63%
to 6.5%.
The Group has an NPE ratio in mid-single digit and is on track
to achieve a target NPE ratio of c.5% by the end of 2022 and less
than 3% by the end of 2025.
A.1.6 Real Estate Management Unit (REMU)
The Real Estate Management Unit (REMU) is focused on the
disposal of on-boarded properties resulting from debt for asset
swaps. Cumulative sales since the beginning of 2017 amount to
EUR1.42 bn and exceed properties on-boarded for the same period of
EUR1.33 bn.
The Group completed disposals of EUR44 mn in 1Q2022 (compared to
EUR 33 mn in 4Q2021 and EUR24 mn in 1Q2021), resulting in a profit
on disposal of c.EUR6 mn for 1Q2022 (compared to a profit on
disposal of EUR 4 mn for 4Q2021 and EUR3 mn for 1Q2021), following
the relaxation of restrictive measures. Asset disposals are across
all property classes, with two thirds of sales by value in 1Q2022
relating to land.
As at 31 March 2022 the carrying value of assets held by REMU
transferred to " non-current assets and disposal groups held for
sale" amounted to EUR 94 mn (compared to EUR 98 mn as at 31
December 2021). They relate to Project Helix 3 and Project Sinope
and comprise stock of property of EUR 89 mn and investment property
of EUR 5 mn as at 31 March 2022 (compared to stock of property of
EUR 93 mn and investment properties of EUR 5 mn as at 31 December
2021).
During 1Q2022, the Group executed sale-purchase agreements
(SPAs) for disposals of 161 properties (with contract value of
EUR51 mn), compared to SPAs for disposals of 164 properties (with
contract value of EUR28 mn) for 1Q2021.
In addition, the Group had a strong pipeline of EUR105 mn by
contract value as at 31 March 2022, of which EUR54 mn related to
SPAs signed (compared to a pipeline of EUR109 mn as at 31 December
2021, of which EUR47 mn related to SPAs signed).
REMU on-boarded EUR8 mn of assets in 1Q2022 (compared to
additions of EUR5 mn in 4Q2021 and EUR11 mn in 1Q2021), 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 A.1.1 'Capital
Base'.
A. Group Financial Results - Underlying Basis (continued)
A.1. Balance Sheet Analysis (continued)
A.1.6 Real Estate Management Unit (REMU) (continued)
Assets held by REMU
As at 31 March 2022, assets held by REMU (excluding assets
classified as held for sale) had a carrying value of EUR1,174 mn
(comprising properties of EUR1,083 mn classified as 'Stock of
property' and EUR91 mn as 'Investment properties'), compared to
EUR1,215 mn as at 31 December 2021 (comprising properties of
EUR1,112 mn classified as 'Stock of property' and EUR103 mn as
'Investment properties').
In addition to assets held by REMU, properties classified as
'Investment properties' with carrying value of EUR11 mn as at 31
March 2022 (compared to EUR15 mn as at 31 December 2021) are not
managed by REMU. These relate mainly to legacy properties held by
the Group before the set-up of REMU in January 2016 and to assets
classified as 'Investment properties' following a change in
use.
Assets held by REMU (Group)
EUR mn 1Q2022 1Q2021 4Q2021 qoq +% yoy +%
------ ------ ------ ------
Opening balance 1,215 1,457 1,264 -4% -17%
------------------------------------------------------------------- ------ ------ ------ ------ ------
On-boarded assets 8 11 5 -69% -30%
------------------------------------------------------------------- ------ ------ ------ ------ ------
Sales (44) (24) (33) 34% 81%
------------------------------------------------------------------- ------ ------ ------ ------ ------
Net impairment loss (5) (6) (20) -76% -21%
------------------------------------------------------------------- ------ ------ ------ ------ ------
Transfer to non-current assets and disposal groups held for sale - (5) (1) - -
------------------------------------------------------------------- ------ ------ ------ ------ ------
Closing balance 1,174 1,433 1,215 -3% -18%
------------------------------------------------------------------- ------ ------ ------ ------ ------
Analysis by type and country Cyprus Greece Romania Total
31 March 2022 (EUR mn)
------------------------------- ------- ------- -------- ------
Residential properties 79 22 0 101
Offices and other commercial
properties 203 19 - 222
Manufacturing and industrial
properties 52 24 0 76
Hotels 25 0 - 25
Land (fields and plots) 499 5 0 504
Golf courses and golf-related
property 246 - - 246
Total 1,104 70 0 1,174
------- ------- --------
Cyprus Greece Romania Total
31 December 2021 (EUR mn)
------------------------------- ------- ------- -------- ------
Residential properties 82 23 0 105
Offices and other commercial
properties 208 23 0 231
Manufacturing and industrial
properties 54 24 0 78
Hotels 25 - - 25
Land (fields and plots) 524 5 1 530
Golf courses and golf-related
property 246 - - 246
Total 1,139 75 1 1,215
------- ------- --------
A. Group Financial Results - Underlying Basis (continued)
A.2. Income Statement Analysis
A.2.1 Total income
(1Q2022 vs
EUR mn 1Q2022 1Q2021 4Q2021 4Q2021) +% yoy +%
------- ------- ------ ------------
Net interest income 71 76 73 -2% -7%
---------------------------------------- ------- ------- ------ ------------ -------
Net fee and commission income 44 39 44 0% 13%
Net foreign exchange gains
and net gains/(losses) on
financial instrument transactions
and disposal/dissolution
of subsidiaries and associates 6 2 10 -47% 124%
Insurance income net of
claims and commissions 16 13 18 -11% 24%
Net gains from revaluation
and disposal of investment
properties and on disposal
of stock of properties 5 2 5 13% 116%
Other income 4 4 4 2% 13%
---------------------------------------- ------- ------- ------ ------------ -------
Non-interest income 75 60 81 -8% 24%
---------------------------------------- ------- ------- ------ ------------ -------
Total income 146 136 154 -5% 7%
---------------------------------------- ------- ------- ------ ------------ -------
Net Interest Margin (annualised)(1) 1.32% 1.63% 1.34% -2 bps -31 bps
---------------------------------------- ------- ------- ------ ------------ -------
Average interest earning
assets
(EUR mn)(1) 21,942 18,978 21,613 2% 16%
---------------------------------------- ------- ------- ------ ------------ -------
1. Including the NPE portfolios classified as "Non-current assets and disposal
groups held for sale", where relevant . p.p. = percentage points, bps =
basis points, 100 basis points (bps) = 1 percentage point
Net interest income (NII) for 1Q2022 amounted to EUR71 mn,
broadly flat qoq. Net interest income (NII) for 1Q2022 was down by
7% yoy, mainly reflecting the foregone interest income on the Helix
2 portfolios.
Quarterly average interest earning assets (AIEA) for 1Q2022
amounted to EUR21,942 mn, up by 16% yoy driven by the increase in
liquid assets following the increase in the borrowing under TLTRO
III, as well as the increase in deposits by EUR1.3 bn yoy .
Quarterly average interest earning assets for 1Q2022 increased by
2% qoq, mainly due to the increase in liquid assets following the
increase in customer deposits by c.EUR130 mn.
Net interest margin (NIM) for 1Q2022 amounted to 1.32% (compared
to 1.34% for 4Q2021 and 1.63% for 1Q2021) negatively impacted by
the corresponding decrease in NII and the increase in average
interest earning assets.
Non-interest income for 1Q2022 amounted to EUR75 mn (compared to
EUR81 mn for 4Q2021, down by 8% qoq and compared to EUR60 mn for
1Q2021, up by 24% yoy), comprising net fee and commission income of
EUR44 mn, net foreign exchange gains and net gains/(losses) on
financial instrument transactions and disposal/dissolution of
subsidiaries and associates of EUR6 mn, net insurance income of
EUR16 mn, net gains from revaluation and disposal of investment
properties and on disposal of stock of properties of EUR5 mn and
other income of EUR4 mn. The qoq decrease is mainly due to higher
revaluation gains on financial instruments in the previous quarter.
The yoy increase is mainly due to an increase in net fee and
commission income and net insurance income, as 1Q2021 was affected
by the pandemic-related lockdown.
Net fee and commission income for 1Q2022 amounted to EUR44 mn,
flat qoq, following the introduction of a revised price list in
February 2022 and the extension of liquidity fees to a wider
customer group in March 2022, offset by seasonally lower
transactional income. Net fee and commission income for 1Q2022 of
EUR44 mn was up 13% yoy (compared to EUR39 mn for 1Q2021), due to
lower transactional fees in 1Q2021 impacted by the pandemic-related
lockdown.
Net foreign exchange gains and net gains/(losses) on financial
instrument transactions and disposal/dissolution of subsidiaries
and associates of EUR6 mn for 1Q2022 (comprising mainly net foreign
exchange gains ), compared to EUR10 mn for 4Q2021 (down 47% qoq)
and to EUR2 mn for 1Q2021. The decrease qoq is mainly due to higher
revaluation gains from financial instruments in the previous
quarter. The increase yoy is mainly due to the lower net foreign
exchange gains in 1Q2021, impacted by the lockdown.
A. Group Financial Results - Underlying Basis (continued)
A.2. Income Statement Analysis (continued)
A.2.1 Total income (continued)
Net insurance income of EUR16 mn for 1Q2022, compared to EUR13
mn for 1Q2021 and EUR18 mn for 4Q2021. The decrease of 11% qoq is
mainly due to a lower level of positive changes in valuation
assumptions and seasonally lower premiums, partially offset by
lower insurance claims.
Net gains from revaluation and disposal of investment properties
and on disposal of stock of properties for 1Q2022 amounted to EUR5
mn (comprising net gains on disposal of stock of properties of
c.EUR5.5 mn, net gains on disposal of investment properties of
c.EUR0.5 mn and net losses from revaluation of investment
properties of c.EUR1 mn) , flat qoq and compared to EUR2 mn in
1Q2021 which was impacted by the lockdown. REMU profit remains
volatile.
Total income for 1Q2022 amounted to EUR146 mn, compared to
EUR154 mn for 4Q2021 (down 5% qoq) and to EUR136 mn for 1Q2021 (up
7% yoy), mainly driven by the changes in the non-interest income as
explained above.
A. Group Financial Results - Underlying Basis (continued)
A.2. Income Statement Analysis (continued)
A.2.2 Total expenses
(1Q2022 vs
EUR mn 1Q2022 1Q2021 4Q2021 4Q2021) +% yoy +%
------- ------- ------- ------------
Staff costs (50) (50) (50) -2% -1%
Other operating expenses (36) (32) (37) -3% 11%
---------------------------------------- ------- ------- ------- ------------ --------
Total operating expenses (86) (82) (87) -2% 4%
---------------------------------------- ------- ------- ------- ------------ --------
Special levy on deposits
and other levies/contributions (10) (9) (12) -16% 8%
Total expenses (96) (91) (99) -4% 5%
------- ------- ------- ------------
Cost to income ratio(1) 66% 67% 65% +1 p.p. -1 p.p.
---------------------------------------- ------- ------- ------- ------------ --------
Cost to income ratio excluding
special levy on deposits
and other levies/contributions(1) 59% 60% 57% +2 p.p. -1 p.p.
---------------------------------------- ------- ------- ------- ------------ --------
1. 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 1Q2022 were EUR96 mn (compared to EUR99 mn
for 4Q2021 and EUR91 mn for 1Q2021, down by 4% qoq and up by 5%
yoy), 52% of which related to staff costs (EUR50 mn), 38% to other
operating expenses (EUR36 mn) and 10% (EUR10 mn) to special levy on
deposits and other levies/contributions. The yoy increase of 5% is
driven by the 11% yoy increase in other operating expenses. The qoq
decrease of 4% is driven by the 16% qoq decrease in special levy on
deposits and other levies/contributions. Further details are
provided below.
Total operating expenses for 1Q2022 were EUR86 mn, compared to
EUR87 mn for 4Q2021 (down by 2% qoq) and to EUR82 mn for 1Q2021 (up
by 4% yoy).
Staff costs for 1Q2022 were EUR50 mn, flat qoq and yoy,
resulting from the combined impact of the voluntary staff exit
plans, the renewal of the collective agreement, and despite the
inflation in 1Q2022.
In July 2021, the Bank reached agreement with the Cyprus Union
of Bank Employees for the renewal of the collective agreement for
the years 2021 and 2022. The agreement related to certain changes
including the introduction of a new pay grading structure linked to
the value of each position of employment, and of a
performance-related pay component as part of the annual salary
increase, both of which have been long-standing objectives of the
Bank and are in line with market best-practice. The expected impact
of the renewal was an increase in staff costs for 2021 and 2022 by
3-4% per annum, in line with the impact of renewals in previous
years.
The Group employed 3,395 persons as at 31 March 2022, compared
to 3,438 persons as at 31 December 2021. In 1Q2022, the Group,
through one of its subsidiaries, completed a voluntary staff exit
plan (VEP), through which a small number of its employees were
approved to leave at a total cost of EUR3 mn, recorded in the
consolidated income statement in 1Q2022 as a non-recurring item in
the underlying basis (compared to a VEP with a total cost of EUR16
mn recorded in 4Q2021, through which c.100 of the Group's full time
employees were approved to leave, with gross annual savings
estimated at c.3% of staff costs).
Other operating expenses for 1Q2022 were EUR36 mn, compared to
EUR37 mn in 4Q2021 (down 3% qoq mainly due to lower marketing
expenses) and to EUR32 mn in 1Q2021 (up 11% yoy, reflecting the
lockdown in 1Q2021).
Special levy on deposits and other levies/contributions for
1Q2022 amounted to EUR10 mn (compared to EUR12 mn for 4Q2021 and
EUR9 mn for 1Q2021) and includes the contribution of the Bank to
the Deposit Guarantee Fund (DGF) of EUR3 mn which relates to 1H2022
and was recorded in 1Q2022. The 4Q2021 charge includes a levy in
the form of an annual guarantee fee relating to the expected
revised Income Tax legislation of EUR5.3 mn (see Section A.1.1
'Capital Base').
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 on deposits and
other levies/contributions for 1Q2022 was 59%, compared to 57% for
4Q2021 and 60% for 1Q2021. The qoq increase of 2 p.p. is driven by
the qoq decrease in total income.
A. Group Financial Results - Underlying Basis (continued)
A.2. Income Statement Analysis (continued)
A.2.3 Profit before tax and non-recurring items
(1Q2022 vs
EUR mn 1Q2022 1Q2021 4Q2021 4Q2021) +% yoy +%
------- ------- ------- ------------
Operating profit 50 45 55 -7% 12%
----------------------------------------- ------- ------- ------- ------------ -------
Loan credit losses (12) (20) (9) 24% -41%
Impairments of other financial
and non-financial assets (5) (5) (23) -77% -4%
(Provisions)/net reversals
for litigation, claims,
regulatory and other matters (0) (1) 8 - -72%
----------------------------------------- ------- ------- ------- ------------ -------
Total loan credit losses,
impairments and provisions (17) (26) (24) -26% -34%
----------------------------------------- ------- ------- ------- ------------ -------
Profit before tax and non-recurring
items 33 19 31 7% 76%
----------------------------------------- ------- ------- ------- ------------ -------
Cost of risk (annualised)(1) 0.44% 0.66% 0.35% +9 bps -22 bps
----------------------------------------- ------- ------- ------- ------------ -------
1. 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 1Q2022 was EUR50 mn, compared to EUR55 mn
for 4Q2021 (down by 7% qoq, driven by the decrease in total income
qoq) and to EUR45 mn for 1Q2021 (up by 12% yoy, as 1Q2021 was
impacted by the lockdown).
Loan credit losses for 1Q2022 totalled EUR12 mn, compared to
EUR9 mn for 4Q2021 (up by 24% qoq) and to EUR20 mn for 1Q2021 (down
by 41% yoy).
The annualised loan credit losses charge (cost of risk) for
1Q2022 amounted to 44 bps (EUR12 mn), compared to a cost of risk of
35 bps (EUR9 mn) for 4Q2021 and 66 bps (EUR20 mn) for 1Q2021. The
cost of risk for 1Q2022 includes 20 bps (c.EUR 5 mn) reflecting the
update in macroeconomic outlook and management overlays on sectors
(such as tourism and private individuals) expected to be impacted
by the crisis in Ukraine and the heightened inflationary pressures.
The cost of risk for 4Q2021 of 35 bps (EUR9 mn) included a reversal
of 46 bps (EUR12 mn) from Stages 1 and 2 mainly due to improved
cash collections and updated financial information. The cost of
risk for 1Q2021 of 66 bps (EUR20 mn) included 29 bps reflecting
loan impairments relating to COVID-19 . Further details are
provided in Section A.1.5 'Loan portfolio quality'.
At 31 March 2022, the allowance for expected loan credit losses,
including residual fair value adjustment on initial recognition and
credit losses on off-balance sheet exposures (please refer to
Section H. 'Definitions & Explanations' for definition)
totalled EUR734 mn (compared to EUR792 mn at 31 December 2021) and
accounted for 6.7% of gross loans including portfolios held for
sale (compared to 7.3% of gross loans including portfolios held for
sale at 31 December 2021 respectively).
Impairments of other financial and non-financial assets for
1Q2022 amounted to EUR5 mn, at the same level as for 1Q2021 and
compared to EUR23 mn for 4Q2021 (which was driven by impairments of
non-financial assets of EUR20 mn relating mainly to specific,
large, illiquid REMU assets).
Provisions for litigation, claims, regulatory and other matters
for 1Q2022 were minimal, compared to EUR1 mn for 1Q2021 and
compared to reversals net of provisions for 4Q2021 of EUR8 mn,
which resulted from revised estimates for cases and matters
provided for.
Profit before tax and non-recurring items for 1Q2022 totalled
EUR33 mn, compared to EUR31 mn for 4Q2021 (up by 7% qoq) and to
EUR19 mn for 1Q2021 (up by 76% yoy).
A. Group Financial Results - Underlying Basis (continued)
A.2. Income Statement Analysis (continued)
A.2. 4 Profit after tax (attributable to the owners of the
Company)
(1Q2022 vs
EUR mn 1Q2022 1Q2021 4Q2021 4Q2021) +% yoy +%
------ ------ ------ -----------
Profit before tax and non-recurring
items 33 19 31 7% 76%
------------------------------------ ------ ------ ------ ----------- ------
Tax (6) (2) (2) 233% 193%
(Profit)/loss attributable
to non-controlling interests 0 (0) (2) - -
Profit after tax and before
non-recurring items (attributable
to the owners of the Company) 27 17 27 0% 65%
------ ------ ------ -----------
Advisory and other restructuring
costs - organic (1) (3) (3) -56% -52%
------------------------------------ ------ ------ ------ ----------- ------
Profit after tax - organic
(attributable to the owners
of the Company) 26 14 24 7% 87%
------------------------------------ ------ ------ ------ ----------- ------
Provisions/net loss relating
to NPE sales(1) (1) (2) (1) -43% -33%
Restructuring and other
costs relating to NPE sales(1) (1) (4) 3 - -86%
Restructuring costs - Voluntary
Staff Exit Plan (VEP) (3) - (16) -81% -
Profit after tax (attributable
to the owners of the Company) 21 8 10 110% 162%
------ ------ ------ -----------
The tax charge for 1Q2022 is EUR6 mn, compared to EUR2 mn for
4Q2021 and for 1Q2021.
Profit after tax and before non-recurring items (attributable to
the owners of the Company) for 1Q2022 was EUR27 mn at the same
levels as for 4Q2021 and compared to EUR17 mn for 1Q2021. Return on
Tangible Equity (ROTE) before non-recurring items calculated using
'profit after tax and before non-recurring items (attributable to
the owners of the Company)' amounts to 6.7% for 1Q2022, compared to
6.6% for 4Q2021 and to 4.1% for 1Q2021.
Advisory and other restructuring costs - organic for 1Q2022
amounted to EUR1 mn, compared to EUR3 mn for 4Q2021 and for
1Q2021.
Profit after tax arising from the organic operations
(attributable to the owners of the Company) for 1Q2022 amounted to
EUR26 mn, compared to EUR24 mn for 4Q2021 and to EUR14 mn for
1Q2021.
Provisions/net loss relating to NPE sales for 1Q2022 was EUR1 mn
relating to Helix 3, compared to EUR1 mn for 4Q2021 and to EUR2 mn
for 1Q2021.
Restructuring and other costs relating to NPE sales for 1Q2022
was EUR1 mn, compared to a credit of EUR3 mn for 4Q2021 (relating
to the agreements for the sale of portfolios of NPEs) and to costs
of EUR4 mn for 1Q2021.
Restructuring costs relating to the Voluntary Staff Exit Plan
(VEP) amounted to EUR3 mn for 1Q2022, compared to EUR16 mn for
4Q2021 and Nil for 1Q2021. For further details please refer to
Section A.2.2 'Total expenses'.
Profit after tax attributable to the owners of the Company for 1
Q2022 was EUR21 mn, compared to EUR10 mn for 4Q2021 and to EUR8 mn
for 1Q2021.
B. Operating Environment
The outlook of the global economy has changed profoundly as a
result of the war in Ukraine and sanctions imposed on Russia and
related entities. The war is prolonged, and sanctions will likely
remain in place for a long period of time, thus decoupling Russia
from the west. Russia is expected to have to go through a deep
restructuring of its economy and reorient it eastward. The west is
expected to adjust their commodity supply chains away from Russia.
The result will be more uncertainty for longer.
Consumer inflation has been accelerating from the third quarter
of 2021 onward, as a result of supply chain disruptions, the
resulting higher energy and food prices, and other shortages in
commodities and industrial goods. The harmonised index of consumer
prices increased by 7.5% in the Euro area in April after rising by
6.1% in the first quarter. In Cyprus inflation accelerated to 8.6%
in April after rising by 5.7% in the first quarter. Prices for
energy and unprocessed food in the first quarter of 2021 increased
respectively by 26.6% and 18.7% in Cyprus. Inflation was 3.5% when
energy is excluded and 2.6% when both energy and unprocessed foods
are excluded. This core inflation is considerably lower than
headline inflation, but still higher than in previous periods.
The war and the energy crisis it generated, changes the monetary
landscape abruptly. The energy price shock is effectively a terms
of trade shock which is simultaneously inflationary and
recessionary. The higher cost of energy imports means that the
terms of trade deteriorate. More domestic production will be
required for the same quantity of imports than before. The
resulting inflation leads to a drop in real disposable income.
Thus, tightening monetary policy and raising the cost of money,
will tend to slow the growth of aggregate demand. There are
inflation and recessionary forces operating at the same time, which
means there are large monetary policy trade-offs. To reduce
inflation interest rates will have to rise which will be slowing
economic activity.
The ECB in their April meetings of the Governing Council,
decided to end its asset purchase programme in the third quarter,
faster than anticipated. This suggests that the Governing Council
sees the downside growth risks being less pronounced than the
inflation risks. The ECB thus can be expected to start raising
interest rates later in the year and to continue raising them
through 2023. The ECB will be more cautious than other central
banks like the Federal Reserve and the Bank of England, both having
already raised their policy rates by 75 basis points. Financing
conditions across Europe will tighten through 2022 but will remain
largely favourable. Long-term interest rates are rising largely
reflecting increased inflation expectations. Real yields continue
to be negative.
The role of the ECB in maintaining financial stability has been
instrumental in recent years. The ECB has been the most prominent
buyer of sovereign bonds through its asset purchase programmes.
Through these purchases the ECB was able to absorb market pressures
and to prevent the fragmentation of bond markets. The ECB will keep
the volume of its asset holdings unchanged until the end of 2024,
thus refinancing maturing bonds. The ECB is mindful of the
uncertainties and will be data driven in its decisions and promised
to act with 'optionality' and 'flexibility' to limit the risk of
fragmentation.
Cyprus received the first disbursement from the Recovery and
Resilience Facility of EUR157 mn in September 2021 following the
approval of the national recovery plan the previous July. This was
pre-financing for 13% of total disbursements over the period
2021-2026. As a reminder, the allocation in grants and loans amount
to EUR1.2 bn in total (EUR1 bn in grants and EUR200 mn in loans)
and will be conditional on the implementation of the reforms agreed
in the national recovery plan. The plan allocates 41% of the funds
to green investments and an additional 23% to digital investments.
Reforms include increasing the efficiency of the public sector and
local government; improving the governments of state-owned
enterprises; improving the efficiency of the judicial system; and
accelerating anti-corruption reforms.
In the banking sector there has been significant progress since
the 2013 financial crisis. Banks have reduced their foreign
exposure; the regulatory framework and prudential oversight have
been strengthened; a new legal framework for foreclosures and
insolvencies has been implemented. Non-performing exposures have
been reduced from EUR28.4 bn in 2014 to EUR3 bn as at the end of
January 2022. The ratio of non-performing exposures to gross loans
dropped from 47.8% to 11.7% in the same period and the coverage
ratio of provisions to non-performing exposures was 49.5%. The
ratio of non-performing exposures still remains elevated when
compared with an EU average of just over 2%. Total loans to the
private sector also declined steeply in the same period. Loans to
residents excluding the government, dropped to EUR22.8 bn at the
end of March 2022, including the non-performing loans, which is 97%
of GDP in 2021.
The recovery in 2021 underpinned a significant increase in
general government revenue and a relative drop in government
spending. As a result, the budget deficit narrowed to 1.7% of GDP
from a deficit of 5.7% of GDP in 2020 reflecting government
measures to support the economy amidst a deep recession induced
from the COVID-19 pandemic. The public debt to GDP ratio dropped to
104% in 2021 from a bloated 115% in 2020. As long as interest
payments on public debt remain low in relation to GDP growth, the
debt to GDP ratio will continue its downward trajectory.
The economic recovery following the country's financial crisis
of 2012-2014 was strong with real GDP growing by 5.3% annually on
average in the period 2015-2019. This compares with the previous
growth period of 1996-2008, when real GDP was growing at an annual
average pace of 4.4%. However, there were distinct qualitative
differences in the two growth periods. Growth in the latter period
had stronger base effects after the 11% cumulative contraction that
had occurred in the period 2009-2014. The pandemic led to a deep
recession in 2020, and real GDP dropped by 5%. However, the
contraction was less severe than the 6.3% drop in the Eurozone
despite Cyprus' high dependence on tourism that was particularly
hit by the pandemic. Tourist arrivals and revenues dropped by about
85% in 2020. The economy recovered swiftly in 2021 and real GDP
increased by 5.5% to its pre-pandemic levels in 2021.
B. Operating Environment (continued)
The war in Ukraine and the sanctions on Russia will cut growth
substantially in 2022. Reliance on Russia has dropped significantly
since the home financial crisis of 2012-2014, but total linkages
remained large. The export services trade on a net basis, and after
adjusting for special purpose entities, was a little less than 5%
of GDP in 2021. This consisted of tourism services, shipping, and
business services to local subsidiaries of Russian companies which
may be affected by the sanctions. Cyprus will also be affected by
the higher inflation fuelled by high oil and commodity prices
including wheat. Russian tourists in a normal year would make about
20% of total arrivals. In the first quarter of the year, real GDP
increased by 5.6% year-on-year seasonally adjusted, compared with
an increase of 5.1% in the Euro area. However, real GDP growth is
expected to slow in 2022 to 2.7%, before accelerating to 3.8% in
2023, both in accordance with the Ministry of Finance Stability
Programme 2022-2025.
Sovereign ratings
The sovereign risk ratings of the Cyprus Government improved
considerably in recent years reflecting reduced banking sector
risks, and improvements in economic resilience and consistent
fiscal outperformance. Cyprus demonstrated policy commitment to
correcting fiscal imbalances through reform and restructuring of
its banking system. Public debt remains high in relation to GDP but
large-scale asset purchases from the ECB ensure favourable funding
costs for Cyprus and ample liquidity in the sovereign bond
market.
Most recently, in March 2022, Fitch Ratings affirmed Cyprus'
Long-Term Issuer Default rating at investment grade BBB- since
November 2018 and stable outlook. The stable outlook reflects the
view that despite Cyprus' exposure to Russia through its tourism
and investment linkages, near-term risks are mitigated by a
strengthened government fiscal position, and continued
normalisation of spending after the pandemic shock. Meanwhile,
medium-term growth prospects remain positive on the back of the
government's Recovery and Resilience Plan (RRP).
Also in March 2022, S&P Global Ratings affirmed Cyprus'
investment grade rating of BBB- and positive outlook. The positive
outlook reflects the view that Cyprus' sovereign rating could be
upgraded within the next 24 months if the country's economic and
budgetary performance continues to strengthen, supported by the
Government's implementation of structural reforms. While the crisis
in Ukraine weighs on Cyprus' economic performances via the
sanctions imposed on Russia, medium-term economic prospects remain
solid according to S&P.
In July 2021, Moody's Investors Service upgraded the Government
of Cyprus' long-term issuer and senior unsecured ratings to Ba1
from Ba2 (since July 2018) and changed the outlook from positive to
stable. The primary driver for the upgrade was the material
improvement in the underlying credit strength of the domestic
banking system, which also reduces the risks of a systemic banking
crisis. In a credit opinion published in April 2022 the rating
agency affirmed Cyprus rating and outlook citing increased
macroeconomic uncertainty stemming from the war in Ukraine.
In April 2022, DBRS Morningstar upgraded the Republic of
Cyprus's Long-Term Foreign and Local Currency - Issuer Ratings from
BBB (low) to BBB and changed the trend from Positive to Stable. The
rating upgrades reflect Cyprus' stronger-than-anticipated economic
and public finance performance during 2021 and the expectation of
DBRS Morningstar that medium term conditions remain supportive of
Cyprus' debt reduction efforts, despite risks posed by Russia's
invasion of Ukraine and the pandemic.
C. Business Overview
Credit ratings
The Group's financial performance is highly correlated to the
economic and operating conditions in Cyprus. In February 2022,
Standard and Poor's affirmed their long-term issuer credit rating
on the Bank of B+, maintaining the positive outlook. In December
2021, Moody's Investors Service upgraded the Bank's long-term
deposit rating to Ba3 from B1, maintaining the positive outlook.
The upgrade reflects significant ongoing improvement in the Bank's
asset quality following the agreement reached in Project Helix 3 in
November 2021. In December 2021, Fitch Ratings affirmed the Bank's
long-term issuer default rating of B- and revised the outlook to
positive from negative. The revision of the outlook reflects
significant improvement in asset quality following the agreement
reached in Project Helix 3, as well as in organically reducing
problem assets since the end of 2019, despite an adverse operating
environment in Cyprus, together with an expectation that this trend
will continue in the near future.
Strategic priorities for the medium term
The Group is a diversified, leading, financial and technology
hub in Cyprus. In February 2022, the Group updated its medium term
strategic targets with an increased focus on creating shareholder
value and increased its medium term return on tangible equity
(ROTE) target to over 10% (2025), providing the foundations for a
return to dividend distributions, subject to performance and
relevant approvals. Since then, the external environment has
changed. As a result, a higher return on tangible equity (ROTE) is
now expected for each year starting in 2023, and a ROTE in excess
of 10% is expected in 2024, a year ahead of plan.
The Bank's medium term strategic priorities are clear, with a
renewed focus on growing revenues in a more capital efficient way,
whilst striving for a leaner operating model. In addition, the
Group continues to focus on further strengthening its asset
quality, whilst maintaining a good capital position, in order to
continue to play a vital role in supporting the recovery of the
Cypriot economy. Moreover, the Group has set the foundations to
enhance its organisational resilience and ESG (Environmental,
Social and Governance) agenda and continues to work towards
building a forward-looking organisation with a clear strategy
supported by effective corporate governance aligned with ESG agenda
priorities. Delivery on the Bank's medium term strategic priorities
is enabled by the Group's transformation plan.
Growing revenues in a more capital efficient way
The Group has a renewed focus on growing revenues in a more
capital efficient way. It aims to grow its high quality new
lending, drive growth in niche areas for further market penetration
and diversify through non-banking services, such as insurance and
digital products.
The Group has continued to provide high quality new loans via
prudent underwriting standards. Growth in new lending in Cyprus has
been focused on selected industries more in line with the Bank's
target risk profile . During 1Q2022, new lending amounted to EUR618
mn, increased by 27% compared to 1Q2021, reaching higher levels
than the equivalent period pre-pandemic, whilst maintaining strict
lending criteria . Demand for new loans is picking up, as economic
activity continues to improve. Aiming at supporting investments by
SMEs and Mid-Caps, the Bank continues its collaboration with the
European Investment Bank (EIB), the European Investment Fund (EIF)
and the Cyprus Government.
Separately, the Group aims to increase revenues over the medium
term through multiple less capital-intensive initiatives, with a
focus on fees and commissions, insurance and non-banking
opportunities, leveraging on the Group's digital capabilities. In
1Q2022, a revised price list for charges and fees was implemented
and liquidity fees were extended to a wider customer group.
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 income, further diversifying the
Group's income streams. The insurance income net of claims and
commissions for 1Q2022 contributed to 22% of non-interest income
and amounted to EUR16 mn, up 24% yoy, as 1Q2021 had been impacted
by the lockdown. Specifically, Eurolife increased its total regular
income by 26% yoy, whilst GIC increased its gross written premiums
by 10% yoy. Furthermore, there are initiatives underway to further
enhance the value of the insurance companies by business growth
supported by digitisation and a lean operating structure. For
information on IFRS 17 please refer to the relevant subsection
below.
C. Business Overview (continued)
Strategic priorities for the medium term (continued)
Growing revenues in a more capital efficient way (continued)
Finally, the Group aims to introduce the Digital Economy
Platform (Jinius) to generate new revenue sources over the medium
term, leveraging on the Bank's market position, knowledge and
digital infrastructure. The Platform aims to bring stakeholders
together, link businesses with each other and with consumers and to
drive opportunities in lifestyle banking and beyond. This platform
is expected to allow the Bank to enhance the engagement of its
customer base, attract new customers, optimise the cost of the
Bank's own processes, and position the Bank next to the customer at
the point and time of need.
Lean operating model
Striving for a lean operating model is a key strategic pillar
for the Group in order to deliver shareholder value in the medium
term, whilst funding its digital transformation and investing in
the business. Management also expects that restructuring costs will
be effectively eliminated as balance sheet de-risking is largely
complete.
Management remains focused on further improvement in efficiency,
through for example further branch footprint optimisation and
further exit solutions to release full time employees.
Specifically, further branch restructuring is currently underway
with an aim to achieve a reduction in the number of branches of
over 25% in the first six months of 2022. In relation to further
exit solutions to release full time employees, one of the Bank's
subsidiaries completed a small-scale targeted voluntary staff exit
plan (VEP) in 1Q2022, through which a small number of full-time
employees were approved to leave at a total cost of EUR3 mn.
Additionally, the workforce is expected be substantially
streamlined in 2022 with a target to reduce the number of employees
by c.15%.
The cost to income ratio is expected to rise in 2022 as revenues
remain under pressure and operating expenses increase due to higher
IT/digitisation investment costs, before improving to 50%-55% by
FY2025.
Transformation plan
The Group continues to work towards becoming a more customer
centric organisation. A transformation plan is already in progress
and aims to enable the shift to modern banking by digitally
transforming customer service, as well as internal operations. The
holistic transformation aims to (i) shift to a more
customer-centric operating model by defining customer segment
strategies, (ii) redefine our distribution model across existing
and new channels, (iii) digitally transform the way we serve our
customers and operate internally, and (iv) improve employee
engagement through a robust set of organisational health
initiatives.
Digital transformation
The Bank's digital transformation focuses on developing digital
services and products that improve the customer experience,
streamlining internal processes, and introducing new ways of
working to improve the workplace environment.
The Bank continued to invest in its digital offerings in 1Q2022,
enhancing its competitive advantage even further. MoneyFit, Bank of
Cyprus' new innovative solution that gives consumers a better view
and insights over their finances, is now available to clients via
the BoC mobile app. In addition, towards the end of the quarter,
1bank launched its renewed internet banking platform. Through the
new platform the Bank has the ability to offer enhanced services
and products to the bank's customers. Furthermore, the bank's
digital onboarding functionality has been improved to better
accommodate IBU (International Business Unit) customers through a
new flow and expansion to four new countries. Finally, the Bank's
youth product is now provided to customers aged 18 to 25 who
onboard digitally.
The adoption of digital products and services continued to grow
and gained momentum in the first quarter of 2022 and beyond. As at
the end of April 2022, 92.5% of the number of transactions
involving deposits, cash withdrawals and internal/external
transfers were performed through digital channels (up by 26.1 p.p.
from 66.4% in September 2017 when the digital transformation
programme was initiated). In addition, 79.6% of individual
customers were digitally engaged (up by 19.4 p.p. from 60.2% in
September 2017), choosing digital channels over branches to perform
their transactions. As at the end of April 2022, active mobile
banking users and active QuickPay users have grown by 22.3% and
40.0% respectively in the last 12 months. The highest number of
QuickPay users to date was recorded in April 2022 with 138 thousand
active users. Likewise, the highest number of QuickPay payments was
recorded in April 2022 with 402 thousand transactions. New
features, such as managing fixed deposits accounts, as well as
depositing a cheque via Mobile app and the opening of new lending
products entirely through the Group's digital channels will soon be
available to customers.
C. Business Overview (continued)
Strategic priorities for the medium term (continued)
Strengthening asset quality
Ensuring the Bank's loan portfolio quality remains healthy is a
priority for the Group. Whilst maintaining high quality new
lending, the Bank aims to complete legacy de-risking, normalise
cost of risk and reduce (other) impairments.
Balance sheet normalisation continued in the first quarter with
further c.EUR100 mn of organic NPE reduction, reducing the Group's
NPE ratio to 6.5%, pro forma for NPE sales. During 2021, the Group
completed Project Helix 2 and agreed on Project Helix 3. Overall,
in the 15 months since the beginning of 2021, and including organic
NPE reductions of c.EUR500 mn, the Group reduced its NPEs by 78%
and its NPE ratio from 25.2% to 6.5%, on a pro forma basis. For
further information please refer to Section A.1.5 'Loan portfolio
quality'.
The Group has a mid-single digit NPE ratio and is on track to
achieve a target ratio of c.5% by the end of 2022 and less than 3%
by the end of 2025.
Enhancing organisational resilience and ESG (Environmental,
Social and Governance) agenda
Moving to a sustainable economy is the challenge of our time. As
part of its vision to be the leading financial hub in Cyprus, the
Bank is determined to lead the transition of Cyprus to a
sustainable future.
The Group has set the foundations to enhance its organisational
resilience and ESG (Environmental, Social and Governance) agenda
and continues to work towards building a forward-looking
organisation with a clear strategy supported by effective corporate
governance aligned with ESG agenda priorities.
In 2022, the Company received a rating of AA (on a scale of
AAA-CCC) in the MSCI ESG Ratings assessment. In 2020, the Bank
received a rating of A in the MSCI ESG Ratings assessment.
In 2021, the first ESG strategy of the Group was formulated,
whereby, in addition to maintaining its leading role in the social
and governance pillars, there will be a shift of focus on
increasing the Bank's positive impact on the environment by
transforming not only its own operations, but also of its client
chain.
The Bank has committed to the following primary ESG targets,
which reflect the pivotal role of ESG in the Bank' strategy:
-- Become carbon neutral by 2030
-- Become Net Zero by 2050
-- Steadily increase Green Asset Ratio
-- Steadily increase Green Mortgage Ratio
-- >=30% women in Group's management bodies (defined as the
Executive Committee (EXCO) and the extended EXCO) by 2030
The Board composition of the Company and the Bank is diverse,
with one third of the Board members being female as at 31 March
2022. The Board displays a strong skill set stemming from broad
international experience. Moreover, the Bank aspires to achieve a
representation of at least 30% women in Group's management bodies
(defined as the EXCO and the Extended EXCO) by 2030. As at 31 March
2022, there is a 24% representation of women in Group's management
bodies and 41% representation of women at key positions below the
Extended EXCO level (defined as positions between Assistant Manager
and Manager A).
C. Business Overview (continued)
Ukrainian crisis
In light of the recent developments in respect of the Russian
invasion of Ukraine that started at the end of February 2022, the
Group is closely monitoring the developments and utilising
dedicated governance structures including a Crisis Management
Committee as required.
In response to the crisis in Ukraine, the EU, UK and the US, in
a coordinated effort joined by several other countries, imposed a
variety of new sanctions with respect to Russia, Belarus and
certain regions of Ukraine, as well as various related entities and
individuals.
Direct impact
The Group does not have any banking operations in Russia or
Ukraine, following the sale of its operations in Ukraine in 2014
and in Russia in 2015. The Group has a legacy net exposure of less
than EUR5 mn as at 31 March 2022 in Russia which is being run
down.
The Group has no exposure to Russian bonds or banks which are
the subject of sanctions.
The Group has limited direct exposure to loans related to
Ukraine, Russia and Belarus, representing c.0.4% of total assets or
c.1% of net loans as at 31 March 2022. The net book value of these
loans stood at c.EUR100 mn as at 31 March 2022, of which c.EUR90 mn
are performing, whilst the remaining were classified as NPEs well
before the current crisis. The portfolio is granular and secured
mainly by real estate properties in Cyprus.
Customer deposits related to Ukrainian, Russian and Belarusian
customers account for only 6% of total customer deposits as at 31
March 2022. This exposure is not material, given the Group's strong
liquidity position. The Group operates with a significant surplus
liquidity of EUR6.4 bn (LCR ratio of 296%) as at 31 March 2022.
Only c.3% of the Group's 2021 net fee and commission income is
derived from Ultimate Beneficiary Owners (UBOs) from Ukraine,
Russia or Belarus.
Indirect impact
Although the Group's direct exposure to Ukraine, Russia or
Belarus is limited, the crisis in Ukraine may have an adverse
impact on the Cypriot economy, mainly due to a negative impact on
the tourism and professional services sectors, increasing energy
prices resulting in inflationary pressures, and disruptions to
global supply chains. In the event that a significant decrease in
the number and volume of transactions occur as a result of the
crisis, this may adversely impact transactional net fee and
commission income for the Group, particularly in international
banking services.
At this stage, it is considered that the impact on the Cypriot
economy is expected to come from higher inflation and a
consequential slowdown in economic activity, with the tourist
sector to be likely most impacted. In response, the Government is
working to replace one third of the expected lost tourist arrivals
from Russia and Ukraine (which amounted to c.20% of 2019 levels)
with arrivals from other markets, such as Belgium, Switzerland and
Scandinavia. Close monitoring of exposures to the tourism sector is
enhanced and the Group remains in close contact with customers to
offer solutions as necessary.
Cyprus is not an importer of Russian oil or gas, however it is
indirectly affected by the intensifying pricing pressures in the
international energy markets. Cyprus mainly imports oil from other
countries, such as Greece, Italy, the Netherlands.
Professional services account for c.10% of GDP (based on FY2020)
of which some relate to Russia or Ukraine and thus expected to be
adversely impacted. There is however no credit risk exposure as the
sector is not levered.
Between 2018-2020, Cyprus recorded net foreign direct investment
(FDI) outflow to Russia. While Russian gross FDI flows in and out
of Cyprus may be quite large, these often reflect the typical
set-up of Special Purpose Entities, with limited actual impact on
the Cypriot economy, hence likely to have limited impact on
domestic activity levels.
Conclusion
Overall, the Group expects limited impact from its direct
exposure, while any indirect impact will depend on the duration and
severity of the crisis and its impact on the Cypriot economy, which
remains uncertain at this stage.
The Group will continue to closely monitor the situation, taking
all necessary and appropriate measures to minimise the impact on
its operations and financial performance, as well as to manage all
related risks and comply with the applicable sanctions.
C. Business Overview (continued)
IFRS 17
IFRS 17, an accounting standard that will be effective from 1
January 2023, impacts the phasing of profit recognition for
insurance contracts. Upon implementation, the Group's
insurance-related retained earnings will be restated and the
reporting of insurance new business revenue will be spread over
time, as the Group provides service to its policyholders (versus
recognised up front under current accounting standards), with the
quantum and timing of the impact dependent on, inter alia, the
amount and mix of new business and extent of assumption changes in
any given year following implementation. As highlighted in our 2021
Annual Financial Report, IFRS 17 requires a number of key changes
compared with our current accounting policies for insurance.
-- Under IFRS 17, there will be no present value of in-force
insurance contracts ('PVIF') asset recognised. Instead, the
estimated future profit will be included in the measurement of the
insurance contract liability as the contractual service margin
('CSM') and this will be gradually recognised in revenue as
services are provided over the duration of the insurance contract.
While the profit over the life of an individual contract will be
unchanged, its emergence will be later under IFRS 17.
-- IFRS 17 requires the increased use of current market values
in the measurement of insurance assets and liabilities hence
insurance liabilities and related assets will be adjusted to
reflect IFRS 17 measurement requirements.
-- In accordance with IFRS 17, directly attributable costs will
be incorporated in the CSM and, as recognised, will be presented as
a deduction to reported revenue. This will result in a reduction in
operating expenses.
The Group is in the process of implementing IFRS 17, and
industry practice and interpretation of the standard are still
developing. Additionally, the impact on the forecast future returns
of our insurance business is dependent on the growth, duration and
composition of our insurance contract portfolio. These estimates
are subject to change in the period up to adoption of the
standard.
For the purposes of planning the Group's financial resources,
our initial estimate is that the accounting changes will result
in:
a) the removal of value in force from the Insurance business
(including associated deferred tax liability) of c.EUR110 mn which
will reduce Group accounting equity by a respective amount (with no
impact on the Group regulatory capital or tangible equity), and
b) the remeasurement of insurance liabilities and the creation
of a contractual service margin (CSM) liability which will increase
both the insurance business and Group equity by an amount c.EUR50
mn, predominantly relating to the life business of the Group.
The adoption of IFRS 17 may result in a modest annual negative
impact on the contribution to profits of the Group's insurance
business in the near term and is incorporated in the Group business
plan.
The day 1 benefit from IFRS 17 arising from the net
remeasurement of insurance liabilities of c.EUR50 mn (including the
creation of the CSM liability), referred to (b) above, enables an
equivalent dividend distribution to the Bank which would benefit
Group regulatory capital by an equivalent amount (upon the payment
of dividend by the subsidiary), enhancing CET1 ratio by c.50
bps.
D. 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:
-- 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
-- Strengthen asset quality; maintaining high quality new
lending, completing legacy de-risking, normalising cost of risk and
reducing (other) impairments
-- Enhance organisational resilience and ESG (Environmental,
Social and Governance) agenda; by continuing to work towards
building a forward-looking organisation with a clear strategy
supported by effective corporate governance aligned with ESG agenda
priorities
KEY STRATEGIC ACTION TAKEN IN 1Q2022 and to date PLAN OF ACTION
PILLARS
Growing revenues
in a more capital * A revised price list for charges and fees was * Grow net performing book and increase in new lending
efficient way; by implemented in February 2022 over the medium term.
enhancing revenue
generation via
growth * Liquidity fees were extended to a wider customer * Enhance fee and commission income, e.g. on-going
in performing group in March 2022 review of price list for charges and fees, increase
book, and less average product holding through cross selling, new
capital-intensive sources of revenue through introduction of Digital
banking and * For further information, please refer to Section C. Economy Platform
financial 'Business Overview'
services
operations * Profitable insurance business with further
(Insurance opportunities to grow, e.g. focus on high margin
and Digital products, leverage on Bank's strong franchise and
Economy) customer base for more targeted cross selling enabled
by digital transformation
------------------------------------------------------------ ---------------------------------------------------------------------
Improving
operating * Completion of a small-scale targeted voluntary staff * Offer exit solutions to release full time employees,
efficiency; by exit plan (VEP) in 1Q2022, by one of the Bank's with a target to reduce the workforce by c.15% in
achieving leaner subsidiaries, through which a small number of the 2022
operations Group's full-time employees were approved to leave at
through a total cost of EUR3 mn
digitisation and * Achieve further branch footprint rationalization, to
automation achieve a reduction in number of branches of over 25%
* Further developments in the Transformation Plan and in 1H2022
the digitisation of the Bank
* Effectively eliminate restructuring costs as
* For further information, please refer to Section C. de-risking is largely complete
'Business Overview'
* Enhance procurement control
* Cost to income ratio (excluding special levy on
deposits and other levies/contributions) expected to
rise in 2022 as revenues remain under pressure and
operating expenses increase due to higher
IT/digitisation investment costs, before improving to
50%-55% by FY2025
------------------------------------------------------------ ---------------------------------------------------------------------
D. Strategy and Outlook (continued)
KEY STRATEGIC ACTION TAKEN IN 1Q2022 and to date PLAN OF ACTION
PILLARS
Strengthening
asset quality * Balance sheet normalisation continued in 1Q2022 with * The Group is on track to achieve a target NPE ratio
further c.EUR100 mn of organic NPE reduction of c.5% by the end of 2022 and of less than 3% by th
e
end of 2025.
* NPE ratio (pro forma for HFS) reduced to mid-single
digit of 6.5% as at 31 March 2022
* For further information, please refer to Section
A.1.5 'Loan portfolio quality' and Section C.
'Business Overview'
----------------------------------------------------------- -----------------------------------------------------------
Enhancing
organisational * Initiation of decarbonisation of the Group's * Implement ESG strategy with a shift of focus on
resilience and operations and portfolio environment
ESG
(Environmental,
Social and * Approval of Green Lending Policy based on the Green * Embed ESG sustainability in the Bank's culture
Governance) Loan Principles (GLPs)
agenda;
by continuing * Continuous enhancement of structure and corporate
to work towards * Environmental products launched e.g. under the governance
building a Fil-eco product scheme
forward-looking
organisation * Invest in people and promote talent
with a clear * For further information, please refer to Section C.
strategy 'Business Overview'
supported by
effective
corporate * Please refer to slide 6 2 of the 1Q2022 Group
governance Financial Results Presentation
aligned with
ESG agenda
priorities
----------------------------------------------------------- -----------------------------------------------------------
In February 2022, the Group updated its medium term strategic
targets with an increased focus on creating shareholder value and
increased its medium term return on tangible equity (ROTE) target
to over 10% (2025), providing the foundations for a return to
dividend distributions from 2023 onwards, subject to performance
and relevant approvals.
Since then, the external environment has changed. The
macroeconomic environment is now characterised by higher inflation
and slower economic growth in the near term, offset by a
significant positive shift in most interest rate curves.
The net effect of these changes on the Group is positive on both
financial performance and capital.
The Group's total income is expected to benefit from higher net
interest margins from 2023, more than offsetting an expected slow
down in volume and net fee and commission income. Higher inflation
may lead to modestly higher costs; there are however plans in place
to mitigate this impact. Some upward pressure on the cost of risk
is expected in the near term, but the normalised cost of risk
target of 40-50 bps remains unchanged.
Overall, a s a result, a higher return on tangible equity (ROTE)
is now expected for each year starting in 2023, and a ROTE in
excess of 10% is expected in 2024, a year ahead of plan.
Also, higher profitability will be positive for the Group's CET1
ratio, which is expected to be further increased following the
adoption of IFRS 17 on 1 January 2023. Specifically, we estimate a
day 1 benefit from IFRS 17 on Group regulatory capital by c.EUR50
mn, thereby enhancing Group CET1 ratio by c.50 bps.
As a result, there is increasing confidence in resuming
meaningful dividends earlier, subject to regulatory approvals.
D. Strategy and Outlook (continued)
The Group's medium term strategic targets are set out below
Medium
Term
Strategic
Targets
Key Metrics 1Q2022 2023 2025 Progress
Profitability Return on Tangible Equity (ROTE)(1) 5.5% >10%
(6.7% recurring) Mid-single digit * Uplift in ROTE each year starting in 2023
On trajectory to consider dividend distribution(4)
* Currently expect to achieve a ROTE >10% from 2024, a
year ahead of plan
----------------------------------------------------------- ------------------- ----------------------------------------------------------- ---------- ------------------------------------------------------------
* On track
Cost to income ratio(2) 59% 50%-55%
----------------------------------------------------------- ------------------- ----------------------------------------------------------- ---------- ------------------------------------------------------------
Asset Quality NPE ratio 6.5%(3) <5% <3% * On track
------------------------------------- ------------------- ----------------------------------------------------------- ---------- ------------------------------------------------------------
Cost of risk 44 bps 40-50 bps
* Some upward pressure in the near term, normalised
cost of risk remains unchanged
----------------------------------------------------------- ------------------- ----------------------------------------------------------- ---------- ------------------------------------------------------------
Capital CET1 ratio Supported by CET1 ratio of 13.5%-14.5%
15.2%(3) * Increased confidence in resuming meaningful dividends
transitional earlier, subject to regulatory approvals
(14.5%(3)
FL)
------------------------------------- ------------------- ----------------------------------------------------------------------- ------------------------------------------------------------
Paving the way for dividend distribution from 2023 onwards(4)
1. Return on Tangible Equity (ROTE) is calculated as Profit after Tax (annualised) divided
by Shareholders' equity minus intangible assets.
2. Calculated using total operating expenses which comprise staff costs and other operating
expenses. Total operating expenses do not include the special levy on deposits or other levies/contributions
and do not include any advisory or other restructuring costs.
3. Pro forma for HFS
4. Subject to performance and relevant approvals
E . Financial Results - Statutory Basis
Unaudited Interim Consolidated Income Statement
Three months ended
31 March
2022 2021
---------- ---------
EUR000 EUR000
---------- ---------
Turnover 201,133 189,420
========== =========
Interest income 89,143 88,602
---------- ---------
Income similar to interest income 4,606 10,629
---------- ---------
Interest expense (18,391) (13,229)
---------- ---------
Expense similar to interest expense (4,011) (9,646)
---------- ---------
Net interest income 71,347 76,356
---------- ---------
Fee and commission income 45,953 40,412
---------- ---------
Fee and commission expense (2,227) (1,865)
---------- ---------
Net foreign exchange gains 5,502 3,630
---------- ---------
Net losses on financial instrument transactions
and disposal/dissolution of subsidiaries and
associates (2,267) (647)
---------- ---------
Insurance income net of claims and commissions 16,327 13,159
---------- ---------
Net losses from revaluation and disposal of investment
properties (527) (857)
---------- ---------
Net gains on disposal of stock of property 5,400 3,111
---------- ---------
Other income 4,073 3,606
---------- ---------
143,581 136,905
---------- ---------
Staff costs (52,851) (50,049)
---------- ---------
Special levy on deposits and other levies/ contributions (9,857) (9,104)
---------- ---------
Other operating expenses (38,167) (39,740)
---------- ---------
42,706 38,012
---------- ---------
Net (losses)/gains on derecognition of financial
assets measured at amortised cost (237) 1,465
---------- ---------
Credit losses to cover credit risk on loans and
advances to customers (10,708) (24,128)
========== =========
Credit losses of other financial instruments (282) (280)
========== =========
Impairment net of reversals of non-financial
assets (4,822) (5,015)
---------- ---------
Profit before share of profit from associates 26,657 10,054
---------- ---------
Share of profit from associates - 137
---------- ---------
Profit before tax 26,657 10,191
---------- ---------
Income tax (5,505) (1,878)
---------- ---------
Profit after tax for the period 21,152 8,313
========== =========
Attributable to:
---------- ---------
Owners of the Company 21,329 8,153
---------- ---------
Non-controlling interests (177) 160
---------- ---------
Profit for the period 21,152 8,313
========== =========
Basic and diluted profit per share attributable
to the owners of the Company
(EUR cent) 4.8 1.8
========== =========
E . Financial Results - Statutory Basis (continued)
Unaudited Interim Consolidated Statement of Comprehensive
Income
Three months ended
31 March
2022 2021
---------- ---------
EUR000 EUR000
---------- ---------
Profit for the period 21,152 8,313
---------- ---------
Other comprehensive income (OCI)
---------- ---------
OCI that may be reclassified in the consolidated
income statement in subsequent periods
---------- ---------
Fair value reserve (debt instruments)
---------- ---------
Net (losses)/gains on investments in debt instruments
measured at fair value through OCI (FVOCI) (5,932) 858
---------- ---------
Transfer to the consolidated income statement (488) -
on disposal
---------- ---------
(6,420) 858
---------- ---------
Foreign currency translation reserve
---------- ---------
Profit/(loss) on translation of net investment
in foreign branches and subsidiaries 4,089 (3,204)
---------- ---------
(Loss)/profit on hedging of net investments in
foreign branches and subsidiaries (4,079) 2,160
---------- ---------
Transfer to the consolidated income statement
on dissolution of foreign subsidiary - (26)
---------- ---------
10 (1,070)
---------- ---------
Total OCI that may be reclassified in the consolidated
income statement in subsequent periods (6,410) (212)
---------- ---------
OCI not to be reclassified in the consolidated
income statement in subsequent periods
---------- ---------
Fair value reserve (equity instruments)
---------- ---------
Net gains on investments in equity instruments
designated at FVOCI 43 27
---------- ---------
Property revaluation reserve
---------- ---------
Deferred tax - (40)
---------- ---------
Actuarial gains/(losses) on the defined benefit
plans
---------- ---------
Remeasurement gains on defined benefit plans 515 4,945
---------- ---------
Total OCI not to be reclassified in the consolidated
income statement in subsequent periods 558 4,932
---------- ---------
Other comprehensive (loss)/income for the period
net of taxation (5,852) 4,720
---------- ---------
Total comprehensive income for the period 15,300 13,033
========== =========
Attributable to:
---------- ---------
Owners of the Company 15,477 12,888
---------- ---------
Non-controlling interests (177) 145
---------- ---------
Total comprehensive income for the period 15,300 13,033
========== =========
E . Financial Results - Statutory Basis (continued)
Unaudited Interim Consolidated Balance Sheet
31 March 31 December
2022 2021
Assets EUR000 EUR000
----------- ------------
Cash and balances with central banks 9,329,711 9,230,883
----------- ------------
Loans and advances to banks 312,967 291,632
----------- ------------
Derivative financial assets 11,706 6,653
----------- ------------
Investments 882,731 879,005
----------- ------------
Investments pledged as collateral 1,182,653 1,260,158
----------- ------------
Loans and advances to customers 10,004,197 9,836,405
----------- ------------
Life insurance business assets attributable
to policyholders 547,333 551,797
----------- ------------
Prepayments, accrued income and other assets 616,617 616,219
----------- ------------
Stock of property 1,083,314 1,111,604
----------- ------------
Deferred tax assets 265,481 265,481
----------- ------------
Investment properties 101,813 117,745
----------- ------------
Property and equipment 248,537 252,130
----------- ------------
Intangible assets 177,612 184,034
----------- ------------
Non-current assets and disposal groups held
for sale 352,638 358,951
----------- ------------
Total assets 25,117,310 24,962,697
=========== ============
Liabilities
----------- ------------
Deposits by banks 532,516 457,039
----------- ------------
Funding from central banks 2,962,100 2,969,600
----------- ------------
Derivative financial liabilities 22,495 32,452
----------- ------------
Customer deposits 17,659,505 17,530,883
----------- ------------
Insurance liabilities 719,869 736,201
----------- ------------
Accruals, deferred income, other liabilities
and other provisions 368,683 361,977
----------- ------------
Pending litigation, claims, regulatory and other
matters 103,569 104,108
----------- ------------
Loan stock 611,137 642,775
----------- ------------
Deferred tax liabilities 45,892 46,435
----------- ------------
Total liabilities 23,025,766 22,881,470
----------- ------------
Equity
----------- ------------
Share capital 44,620 44,620
----------- ------------
Share premium 594,358 594,358
----------- ------------
Revaluation and other reserves 203,025 213,192
----------- ------------
Retained earnings 1,007,284 986,623
----------- ------------
Equity attributable to the owners of the Company 1,849,287 1,838,793
----------- ------------
Other equity instruments 220,000 220,000
----------- ------------
Total equity excluding non--controlling interests 2,069,287 2,058,793
----------- ------------
Non--controlling interests 22,257 22,434
----------- ------------
Total equity 2,091,544 2,081,227
----------- ------------
Total liabilities and equity 25,117,310 24,962,697
=========== ============
E . Financial Results - Statutory Basis (continued)
Unaudited Interim Consolidated Statement of Changes in
Equity
Attributable to the owners of the Company Other Non- Total
equity controlling equity
instruments interests
Share Share Treasury Retained Property Financial Life Foreign Total
capital premium shares earnings revaluation instruments insurance currency
reserve fair in-force translation
value business reserve
reserve reserve
-------- -------- --------- ---------- ------------ ------------ ---------- ------------ ----------
EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000
-------- -------- --------- ---------- ------------ ------------ ---------- ------------ ---------- ------------ ------------ ----------
1 January 2022 44,620 594,358 (21,463) 986,623 80,060 23,285 113,651 17,659 1,838,793 220,000 22,434 2,081,227
-------- -------- --------- ---------- ------------ ------------ ---------- ------------ ---------- ------------ ------------ ----------
Profit/(loss)
for
the period - - - 21,329 - - - - 21,329 - (177) 21,152
-------- -------- --------- ---------- ------------ ------------ ---------- ------------ ---------- ------------ ------------ ----------
Other
comprehensive
income/
(loss) after
tax for the
period - - - 515 - (6,377) - 10 (5,852) - - (5,852)
-------- -------- --------- ---------- ------------ ------------ ---------- ------------ ---------- ------------ ------------ ----------
Total
comprehensive
income/(loss)
after
tax for the
period - - - 21,844 - (6,377) - 10 15,477 - (177) 15,300
-------- -------- --------- ---------- ------------ ------------ ---------- ------------ ---------- ------------ ------------ ----------
Decrease in
value
of in-force
life
insurance
business - - - 4,343 - - (4,343) - - - - -
-------- -------- --------- ---------- ------------ ------------ ---------- ------------ ---------- ------------ ------------ ----------
Tax on
decrease in
value of
in-force
life
insurance
business - - - (543) - - 543 - - - - -
-------- -------- --------- ---------- ------------ ------------ ---------- ------------ ---------- ------------ ------------ ----------
Defence
contribution - - - (4,983) - - - - (4,983) - - (4,983)
-------- -------- --------- ---------- ------------ ------------ ---------- ------------ ---------- ------------ ------------ ----------
31 March 2022 44,620 594,358 (21,463) 1,007,284 80,060 16,908 109,851 17,669 1,849,287 220,000 22,257 2,091,544
======== ======== ========= ========== ============ ============ ========== ============ ========== ============ ============ ==========
E . Financial Results - Statutory Basis (continued)
Unaudited Interim Consolidated Statement of Changes in Equity
(continued)
Attributable to the owners of the Company Other Non- Total
equity controlling equity
instruments interests
Share Share Treasury Retained Property Financial Life Foreign Total
capital premium shares earnings revaluation instruments insurance currency
reserve fair in-force translation
value business reserve
reserve reserve
-------- -------- --------- --------- ------------ ------------ ---------- ------------ ----------
EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000
-------- -------- --------- --------- ------------ ------------ ---------- ------------ ---------- ------------ ------------ ----------
1 January 2021 44,620 594,358 (21,463) 982,513 79,515 22,894 110,401 17,806 1,830,644 220,000 24,410 2,075,054
-------- -------- --------- --------- ------------ ------------ ---------- ------------ ---------- ------------ ------------ ----------
Profit for the
period - - - 8,153 - - - - 8,153 - 160 8,313
-------- -------- --------- --------- ------------ ------------ ---------- ------------ ---------- ------------ ------------ ----------
Other
comprehensive
income/
(loss) after
tax for the
period - - - 4,945 (30) 890 - (1,070) 4,735 - (15) 4,720
-------- -------- --------- --------- ------------ ------------ ---------- ------------ ---------- ------------ ------------ ----------
Total
comprehensive
income/(loss)
after
tax for the
period - - - 13,098 (30) 890 - (1,070) 12,888 - 145 13,033
-------- -------- --------- --------- ------------ ------------ ---------- ------------ ---------- ------------ ------------ ----------
Increase in
value
of in-force
life
insurance
business - - - (1,828) - - 1,828 - - - - -
-------- -------- --------- --------- ------------ ------------ ---------- ------------ ---------- ------------ ------------ ----------
Tax on
increase in
value of
in-force
life
insurance
business - - - 228 - - (228) - - - - -
-------- -------- --------- --------- ------------ ------------ ---------- ------------ ---------- ------------ ------------ ----------
Transfer of
OCI reserve
upon disposal
of
investments
in equity
instruments
designated
as at FVOCI - - - (50) - 50 - - - - - -
-------- -------- --------- --------- ------------ ------------ ---------- ------------ ---------- ------------ ------------ ----------
31 March 2021 44,620 594,358 (21,463) 993,961 79,485 23,834 112,001 16,736 1,843,532 220,000 24,555 2,088,087
======== ======== ========= ========= ============ ============ ========== ============ ========== ============ ============ ==========
F. Notes
F.1 Reconciliation of interim income statement between statutory and underlying basis
EUR million Underlying NPE Other Statutory
basis Sales basis
Net interest income 71 - - 71
=========== ======= ====== ==========
Net fee and commission income 44 - - 44
=========== ======= ====== ==========
Net foreign exchange gains and net
losses on financial instrument transactions
and disposal/dissolution of subsidiaries
and associates 6 - (2) 4
=========== ======= ====== ==========
Insurance income net of claims and
commissions 16 - - 16
=========== ======= ====== ==========
Net gains from revaluation and disposal
of investment properties and on disposal
of stock of properties 5 - - 5
=========== ======= ====== ==========
Other income 4 - - 4
----------- ------- ------ ----------
Total income 14 6 - (2) 14 4
=========== ======= ====== ==========
( 4 (10
Total expenses (96) (1) ) 1 )
----------- ------- ------ ----------
( 6
Operating profit 5 0 (1) ) 4 3
=========== ======= ====== ==========
Loan credit losses (12) (1) 2 (11)
=========== ======= ====== ==========
Impairments of other financial and
non-financial assets (5) - - (5)
=========== ======= ====== ==========
Profit before tax and non-recurring
items 3 3 (2) (4) 2 7
=========== ======= ====== ==========
Tax ( 6 ) - - ( 6 )
=========== ======= ====== ==========
Profit after tax and before non-recurring
items (attributable to the owners of
the Company) 27 (2) (4) 21
=========== ======= ====== ==========
Advisory and other restructuring costs-organic (1) - 1 0
----------- ------- ------ ----------
Profit after tax - organic* (attributable
to the owners of the Company) 26 (2) (3) 21
=========== ======= ====== ==========
Provisions/net loss relating to NPE
sales (1) 1 - 0
=========== ======= ====== ==========
Restructuring and other costs relating
to NPE sales (1) 1 - 0
=========== ======= ====== ==========
Restructuring costs - Voluntary Staff
Exit Plan (VEP) (3) - 3 0
=========== ======= ====== ==========
Profit after tax (attributable to
the owners of the Company) 21 0 0 21
=========== ======= ====== ==========
*This is the profit after tax (attributable to the owners of the
Company), before the provisions/net loss relating to NPE sales,
related restructuring and other costs, and restructuring costs
related to the Voluntary Staff Exit Plan (VEP).
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 EUR1
million relating to the agreements for the sale of
portfolios of NPEs and are presented within
'Restructuring and other costs relating to NPE sales
' under the underlying basis.
* Loan credit losses under the statutory basis include
the loan credit losses relating to Project Helix 3 of
approximately EUR1 million and are disclosed under
non-recurring items within 'Provisions/net loss
relating to NPE sales' under the underlying basis.
Other reclassifications
* Net losses on loans and advances to customers at FVPL
of EUR2 million included in 'Loan credit losses'
under the underlying basis are included in 'Net
losses 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 their
presentation with the loan credit losses on loans and
advances to customers at amortised cost.
* Advisory and other restructuring costs of
approximately EUR1 million included in 'Other
operating expenses' under the statutory basis are
separately presented under the underlying basis since
they comprise mainly fees to external advisors in
relation to the transformation programme of BOC PCL.
* Total expenses under the statutory basis include
restructuring costs relating to the voluntary staff
exit plan (VEP) of JCC Payment Systems Ltd of EUR3
million and are separately presented under the
underlying basis, since they represent one-off items.
F. Notes (continued)
F.2 Customer deposits
The analysis of customer deposits is presented below:
31 March 31 December
2022 2021
----------- ------------
By type of deposit EUR000 EUR000
----------- ------------
Demand 9,318,829 9,221,791
----------- ------------
Savings 2,517,088 2,423,086
----------- ------------
Time or notice 5,823,588 5,886,006
----------- ------------
17,659,505 17,530,883
=========== ============
By geographical area
----------- ------------
Cyprus 12,193,655 11,992,960
----------- ------------
Greece 1,871,104 1,906,854
----------- ------------
United Kingdom 758,416 713,621
----------- ------------
Romania 52,202 54,306
----------- ------------
Russia 619,219 661,820
----------- ------------
Ukraine 279,487 276,248
----------- ------------
Belarus 56,598 55,738
----------- ------------
Other countries 1,828,824 1,869,336
----------- ------------
17,659,505 17,530,883
=========== ============
Deposits by geographical area are based on the country of
passport of the Ultimate Beneficial Owner
31 March 31 December
2022 2021
By currency EUR000 EUR000
----------- ------------
Euro 15,864,621 15,736,030
----------- ------------
US Dollar 1,390,888 1,373,584
----------- ------------
British Pound 316,653 312,918
----------- ------------
Russian Rouble 11,888 28,539
----------- ------------
Swiss Franc 13,431 10,865
----------- ------------
Other currencies 62,024 68,947
----------- ------------
17,659,505 17,530,883
By customer sector
----------- ------------
Corporate 1,122,474 1,117,148
----------- ------------
Global corporate 650,124 631,002
----------- ------------
SMEs 851,966 866,860
----------- ------------
Retail 11,211,238 11,051,397
----------- ------------
Restructuring
----------- ------------
- corporate 22,223 21,658
----------- ------------
- SMEs 11,944 13,091
----------- ------------
- retail other 9,201 9,862
----------- ------------
Recoveries
----------- ------------
- corporate 1,222 1,383
----------- ------------
International banking services 3,467,506 3,500,183
----------- ------------
Wealth management 311,607 318,299
----------- ------------
17,659,505 17,530,883
=========== ============
F. Notes (continued)
F.3 Loans and advances to customers
31 March 31 December
2022 2021
EUR000 EUR000
----------- ------------
Gross loans and advances to customers at amortised
cost 9,976,915 9,840,535
----------- ------------
Allowance for ECL for impairment of loans and
advances to customers (253,846) (285,998)
----------- ------------
9,723,069 9,554,537
----------- ------------
Loans and advances to customers measured at FVPL 281,128 281,868
----------- ------------
10,004,197 9,836,405
=========== ============
F.4 Credit risk concentration of loans and advances to customers
The credit risk concentration, which is based on industry
(economic activity) and by business line, as well as the
geographical concentration, is presented in the tables below. The
geographical concentration, for credit risk concentration purposes,
is based on the Group's Country Risk Policy which is followed for
monitoring the Group's exposures, in accordance with which
exposures are analysed by country of risk based on the country of
residency for individuals and the country of registration for
companies.
31 March 2022 Cyprus Greece United Romania Russia Other Gross
Kingdom countries loans
at amortised
cost
By economic
activity EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000
---------- -------- --------- -------- ------- ----------- --------------
Trade 957,718 468 71 2 3,192 67 961,518
---------- -------- --------- -------- ------- ----------- --------------
Manufacturing 310,847 41,525 10 - 1,156 29,722 383,260
---------- -------- --------- -------- ------- ----------- --------------
Hotels and catering 901,800 33,495 36,942 - - 40,107 1,012,344
---------- -------- --------- -------- ------- ----------- --------------
Construction 573,664 9,083 99 1,998 616 49 585,509
---------- -------- --------- -------- ------- ----------- --------------
Real estate 900,038 96,807 1,928 11,064 - 48,648 1,058,485
---------- -------- --------- -------- ------- ----------- --------------
Private individuals 4,419,056 8,779 98,119 1,213 30,584 67,254 4,625,005
---------- -------- --------- -------- ------- ----------- --------------
Professional
and other services 646,425 1,007 5,413 889 15,233 24,923 693,890
---------- -------- --------- -------- ------- ----------- --------------
Other sectors 430,047 6 34 - 2 226,815 656,904
---------- -------- --------- -------- ------- ----------- --------------
9,139,595 191,170 142,616 15,166 50,783 437,585 9,976,915
========== ======== ========= ======== ======= ===========
The basis of the exposure as disclosed in Section 'C. Business
Overview' is expanded compared to the country risk exposure as
included in the table above which is disclosed by reference to the
country of residency/country of registration, to also include
exposures for loans and advances to customers with passport of
origin in these countries and/or business activities within these
countries and/or where the UBO has passport of origin or residency
in these countries.
F. Notes (continued)
F.4 Credit risk concentration of loans and advances to customers (continued)
31 March 2022 Cyprus Greece United Romania Russia Other Gross
Kingdom countries loans
at amortised
cost
By business
line EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000
---------- -------- --------- -------- ------- ----------- --------------
Corporate 2,094,542 9,449 57 - 15,634 109 2,119,791
---------- -------- --------- -------- ------- ----------- --------------
Global corporate 1,426,478 172,748 44,257 11,764 - 359,637 2,014,884
---------- -------- --------- -------- ------- ----------- --------------
SMEs 1,038,066 727 2,358 2,036 4,505 2,294 1,049,986
---------- -------- --------- -------- ------- ----------- --------------
Retail
---------- -------- --------- -------- ------- ----------- --------------
- housing 3,123,352 3,272 43,724 867 3,962 26,823 3,202,000
---------- -------- --------- -------- ------- ----------- --------------
- consumer,
credit cards
and other 900,030 1,091 717 141 202 2,107 904,288
---------- -------- --------- -------- ------- ----------- --------------
Restructuring
---------- -------- --------- -------- ------- ----------- --------------
- corporate 51,785 - 526 - 32 61 52,404
---------- -------- --------- -------- ------- ----------- --------------
- SMEs 61,249 - 170 - 166 445 62,030
---------- -------- --------- -------- ------- ----------- --------------
- retail housing 79,644 152 1,731 - 362 704 82,593
---------- -------- --------- -------- ------- ----------- --------------
- retail other 27,543 4 116 1 2 43 27,709
---------- -------- --------- -------- ------- ----------- --------------
Recoveries
---------- -------- --------- -------- ------- ----------- --------------
- corporate 34,424 - 4 86 222 260 34,996
---------- -------- --------- -------- ------- ----------- --------------
- SMEs 32,577 - 1,855 59 2,240 2,095 38,826
---------- -------- --------- -------- ------- ----------- --------------
- retail housing 107,286 250 29,921 76 6,393 12,035 155,961
---------- -------- --------- -------- ------- ----------- --------------
- retail other 55,143 27 2,613 4 247 800 58,834
---------- -------- --------- -------- ------- ----------- --------------
International
banking services 77,017 2,137 14,567 132 16,816 23,703 134,372
---------- -------- --------- -------- ------- ----------- --------------
Wealth management 30,459 1,313 - - - 6,469 38,241
---------- -------- --------- -------- ------- ----------- --------------
9,139,595 191,170 142,616 15,166 50,783 437,585 9,976,915
========== ======== ========= ======== ======= =========== ==============
31 December Cyprus Greece United Romania Russia Other Gross
20 21 Kingdom countries loans
at amortised
cost
By economic
activity EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000
---------- -------- --------- -------- ------- ----------- --------------
Trade 977,703 505 122 60 3,351 146 981,887
---------- -------- --------- -------- ------- ----------- --------------
Manufacturing 303,372 179 - - 1,212 25,674 330,437
---------- -------- --------- -------- ------- ----------- --------------
Hotels and catering 881,205 33,422 37,450 - - 40,123 992,200
---------- -------- --------- -------- ------- ----------- --------------
Construction 510,928 9,005 108 2,108 646 58 522,853
---------- -------- --------- -------- ------- ----------- --------------
Real estate 959,891 125,123 1,950 11,443 - 49,293 1,147,700
---------- -------- --------- -------- ------- ----------- --------------
Private individuals 4,379,843 9,185 121,260 1,057 37,315 73,997 4,622,657
---------- -------- --------- -------- ------- ----------- --------------
Professional
and other services 543,424 1,007 5,516 875 16,492 35,142 602,456
---------- -------- --------- -------- ------- ----------- --------------
Other sectors 458,005 7 40 - 8 182,285 640,345
---------- -------- --------- -------- ------- ----------- --------------
9,014,371 178,433 166,446 15,543 59,024 406,718 9,840,535
========== ======== ========= ======== ======= =========== ==============
F. Notes (continued)
F.4 Credit risk concentration of loans and advances to customers (continued)
31 December Cyprus Greece United Romania Russia Other Gross
2021 Kingdom countries loans
at amortised
cost
By business
line EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000
---------- -------- --------- -------- ------- ----------- --------------
Corporate 2,018,926 9,430 60 99 15,778 113 2,044,406
---------- -------- --------- -------- ------- ----------- --------------
Global corporate 1,417,643 159,349 44,132 11,742 - 320,730 1,953,596
---------- -------- --------- -------- ------- ----------- --------------
SMEs 1,038,599 773 1,869 2,047 4,701 2,345 1,050,334
---------- -------- --------- -------- ------- ----------- --------------
Retail
---------- -------- --------- -------- ------- ----------- --------------
- housing 3,068,097 3,466 47,742 629 4,513 26,819 3,151,266
---------- -------- --------- -------- ------- ----------- --------------
- consumer,
credit cards
and other 884,231 1,101 760 126 237 2,232 888,687
---------- -------- --------- -------- ------- ----------- --------------
Restructuring
---------- -------- --------- -------- ------- ----------- --------------
- corporate 60,446 - 526 - 32 1,213 62,217
---------- -------- --------- -------- ------- ----------- --------------
- SMEs 69,501 - 338 - - 340 70,179
---------- -------- --------- -------- ------- ----------- --------------
- retail housing 80,730 152 3,058 - 392 752 85,084
---------- -------- --------- -------- ------- ----------- --------------
- retail other 32,611 14 132 - 3 238 32,998
---------- -------- --------- -------- ------- ----------- --------------
Recoveries
---------- -------- --------- -------- ------- ----------- --------------
- corporate 35,010 - - 589 219 256 36,074
---------- -------- --------- -------- ------- ----------- --------------
- SMEs 30,505 - 2,557 2 3,699 2,554 39,317
---------- -------- --------- -------- ------- ----------- --------------
- retail housing 109,945 382 45,158 167 9,254 18,213 183,119
---------- -------- --------- -------- ------- ----------- --------------
- retail other 54,959 30 4,356 4 1,557 1,304 62,210
---------- -------- --------- -------- ------- ----------- --------------
International
banking services 76,314 2,402 15,211 138 18,639 23,214 135,918
---------- -------- --------- -------- ------- ----------- --------------
Wealth management 36,854 1,334 547 - - 6,395 45,130
---------- -------- --------- -------- ------- ----------- --------------
9,014,371 178,433 166,446 15,543 59,024 406,718 9,840,535
========== ======== ========= ======== ======= =========== ==============
The loans and advances to customers include lending exposures in
Cyprus with collaterals in Greece with a carrying value as at 31
March 2022 of EUR102,287 thousand (31 December 2021: EUR100,039
thousand).
The loan and advances to customers reported within 'Other
countries' as at 31 March 2022 include exposures of EUR3,4 million
in Ukraine (31 December 2021: EUR3,6 million).
F. Notes (continued)
F.4 Credit risk concentration of loans and advances to customers (continued)
Loans and advances to customers classified as held for sale
Industry (economic activity), business line and geographical
concentration of the Group's gross loans and advances to customers
at amortised cost classified as held for sale is presented in the
tables below:
31 March 2022 Cyprus United Romania Russia Other Gross
Kingdom countries loans
at amortised
cost
By economic activity EUR000 EUR000 EUR000 EUR000 EUR000 EUR000
-------- --------- -------- ------- ----------- ----------------
Trade 57,260 - 522 1 - 57,783
-------- --------- -------- ------- ----------- ----------------
Manufacturing 25,097 1 112 - - 25,210
-------- --------- -------- ------- ----------- ----------------
Hotels and catering 15,036 3 283 - - 15,322
-------- --------- -------- ------- ----------- ----------------
Construction 28,460 - 244 - - 28,704
-------- --------- -------- ------- ----------- ----------------
Real estate 4,662 - 9,461 - - 14,123
-------- --------- -------- ------- ----------- ----------------
Private individuals 369,171 1,080 55 817 4,617 375,740
-------- --------- -------- ------- ----------- ----------------
Professional and other
services 26,701 2 1,477 - - 28,180
-------- --------- -------- ------- ----------- ----------------
Other sectors 11,620 - 69 - - 11,689
-------- --------- -------- ------- ----------- ----------------
538,007 1,086 12,223 818 4,617 556,751
======== ========= ======== ======= =========== ================
31 March 2022 Cyprus United Romania Russia Other Gross
Kingdom countries loans
at amortised
cost
By business line EUR000 EUR000 EUR000 EUR000 EUR000 EUR000
-------- --------- -------- ------- ----------- --------------
Global corporate - - 10,568 - - 10,568
-------- --------- -------- ------- ----------- --------------
SMEs - - 247 - - 247
-------- --------- -------- ------- ----------- --------------
Restructuring
-------- --------- -------- ------- ----------- --------------
- corporate 370 - - - - 370
-------- --------- -------- ------- ----------- --------------
- SMEs 5,185 - - - - 5,185
-------- --------- -------- ------- ----------- --------------
- retail housing 17,888 498 - - 34 18,420
-------- --------- -------- ------- ----------- --------------
- retail other 7,117 - - - - 7,117
-------- --------- -------- ------- ----------- --------------
Recoveries
-------- --------- -------- ------- ----------- --------------
- corporate 8,177 - 1,098 - - 9,275
-------- --------- -------- ------- ----------- --------------
- SMEs 17,647 1 310 779 385 19,122
-------- --------- -------- ------- ----------- --------------
- retail housing 245,761 577 - 38 3,679 250,055
-------- --------- -------- ------- ----------- --------------
- retail other 235,862 10 - 1 519 236,392
-------- --------- -------- ------- ----------- --------------
538,007 1,086 12,223 818 4,617 556,751
======== ========= ======== ======= =========== ==============
F. Notes (continued)
F.4 Credit risk concentration of loans and advances to customers (continued)
Loans and advances to customers classified as held for sale
(continued)
31 December 2021 Cyprus United Romania Russia Other Gross
Kingdom countries loans
at amortised
cost
By economic activity EUR000 EUR000 EUR000 EUR000 EUR000 EUR000
-------- --------- -------- ------- ----------- --------------
Trade 56,859 - 514 - - 57,373
-------- --------- -------- ------- ----------- --------------
Manufacturing 24,688 1 110 - - 24,799
-------- --------- -------- ------- ----------- --------------
Hotels and catering 14,794 1 278 - - 15,073
-------- --------- -------- ------- ----------- --------------
Construction 28,226 - 231 - - 28,457
-------- --------- -------- ------- ----------- --------------
Real estate 4,575 - 9,395 - - 13,970
-------- --------- -------- ------- ----------- --------------
Private individuals 369,182 1,070 55 804 4,087 375,198
-------- --------- -------- ------- ----------- --------------
Professional and other
services 27,866 2 1,466 - - 29,334
-------- --------- -------- ------- ----------- --------------
Other sectors 11,476 - 77 - 32 11,585
-------- --------- -------- ------- ----------- --------------
537,666 1,074 12,126 804 4,119 555,789
======== ========= ======== ======= =========== ==============
31 December 2021 Cyprus United Romania Russia Other Gross
Kingdom countries loans
at amortised
cost
By business line EUR000 EUR000 EUR000 EUR000 EUR000 EUR000
-------- --------- -------- ------- ----------- ----------------
Global corporate - - 10,441 - 32 10,473
-------- --------- -------- ------- ----------- ----------------
SMEs - - 231 - - 231
-------- --------- -------- ------- ----------- ----------------
Retail
-------- --------- -------- ------- ----------- ----------------
- housing 153 - - - - 153
-------- --------- -------- ------- ----------- ----------------
- consumer, credit
cards and other 2 - - - - 2
-------- --------- -------- ------- ----------- ----------------
Restructuring
-------- --------- -------- ------- ----------- ----------------
- corporate 374 - - - - 374
-------- --------- -------- ------- ----------- ----------------
- SMEs 5,301 - - - - 5,301
-------- --------- -------- ------- ----------- ----------------
- retail housing 23,769 501 - - 34 24,304
-------- --------- -------- ------- ----------- ----------------
- retail other 12,702 - - - - 12,702
-------- --------- -------- ------- ----------- ----------------
Recoveries
-------- --------- -------- ------- ----------- ----------------
- corporate 8,090 - 1,111 - - 9,201
-------- --------- -------- ------- ----------- ----------------
- SMEs 17,923 1 343 766 381 19,414
-------- --------- -------- ------- ----------- ----------------
- retail housing 238,791 566 - 38 3,210 242,605
-------- --------- -------- ------- ----------- ----------------
- retail other 230,561 6 - - 462 231,029
-------- --------- -------- ------- ----------- ----------------
537,666 1,074 12,126 804 4,119 555,789
======== ========= ======== ======= =========== ================
F. Notes (continued)
F.5 Analysis of loans and advances to customers by stage
The following tables present the Group's gross loans and
advances at amortised cost before residual fair value adjustment on
initial recognition and at amortised cost, by stage.
31 March 2022 Stage Stage Stage POCI Total
1 2 3
EUR000 EUR000 EUR000 EUR000 EUR000
---------- ---------- -------- -------- -----------
Gross loans at amortised cost
before residual fair value adjustment
on initial recognition 7,712,357 1,699,878 523,228 140,911 10,076,374
---------- ---------- -------- -------- -----------
Residual fair value adjustment
on initial recognition (69,560) (21,272) (2,816) (5,811) (99,459)
---------- ---------- -------- -------- -----------
Gross loans at amortised cost 7,642,797 1,678,606 520,412 135,100 9,976,915
========== ========== ======== ======== ===========
Cyprus 7,642,545 1,678,606 498,489 135,100 9,954,740
---------- ---------- -------- -------- -----------
Other countries 252 - 21,923 - 22,175
---------- ---------- -------- -------- -----------
7,642,797 1,678,606 520,412 135,100 9,976,915
========== ========== ======== ======== ===========
31 December 2021 Stage Stage Stage POCI Total
1 2 3
EUR000 EUR000 EUR000 EUR000 EUR000
---------- ---------- -------- --------- ----------
Gross loans at amortised cost
before residual fair value adjustment
on initial recognition 7,488,354 1,721,231 576,873 159,755 9,946,213
---------- ---------- -------- --------- ----------
Residual fair value adjustment
on initial recognition (69,659) (22,051) (3,530) (10,438) (105,678)
---------- ---------- -------- --------- ----------
Gross loans at amortised cost 7,418,695 1,699,180 573,343 149,317 9,840,535
========== ========== ======== ========= ==========
Cyprus 7,418,432 1,699,180 545,327 149,317 9,812,256
---------- ---------- -------- --------- ----------
Other countries 263 - 28,016 - 28,279
---------- ---------- -------- --------- ----------
7,418,695 1,699,180 573,343 149,317 9,840,535
========== ========== ======== ========= ==========
Loans and advances to customers classified as held for sale
31 March 2022 Stage Stage Stage POCI Total
1 2 3
EUR000 EUR000 EUR000 EUR000 EUR000
------- ------- -------- --------- ----------
Gross loans at amortised cost
before residual fair value adjustment
on initial recognition - 2,960 476,622 96,261 575,843
------- ------- -------- --------- ----------
Residual fair value adjustment
on initial recognition - (62) (2,218) (16,812) (19,092)
------- ------- -------- --------- ----------
Gross loans at amortised cost - 2,898 474,404 79,449 556,751
======= ======= ======== ========= ==========
Cyprus - 2,898 474,157 79,449 556,504
------- ------- -------- --------- ----------
Other countries - - 247 - 247
------- ------- -------- --------- ----------
- 2,898 474,404 79,449 556,751
======= ======= ======== ========= ==========
31 December 2021 Stage Stage Stage POCI Total
1 2 3
EUR000 EUR000 EUR000 EUR000 EUR000
------- ------- -------- --------- ----------
Gross loans at amortised cost
before residual fair value adjustment
on initial recognition - 2,132 476,538 96,209 574,879
------- ------- -------- --------- ----------
Residual fair value adjustment
on initial recognition - (57) (2,079) (16,954) (19,090)
------- ------- -------- --------- ----------
Gross loans at amortised cost - 2,075 474,459 79,255 555,789
======= ======= ======== ========= ==========
Cyprus - 2,075 463,774 79,255 545,104
------- ------- -------- --------- ----------
Other countries - - 10,685 - 10,685
------- ------- -------- --------- ----------
- 2,075 474,459 79,255 555,789
======= ======= ======== ========= ==========
F. Notes (continued)
F.5 Analysis of loans and advances to customers by stage (continued)
The following tables present the Group's gross loans and
advances to customers at amortised cost by stage and by business
line concentration:
31 March 2022 Stage Stage Stage POCI Total
1 2 3
By business line EUR000 EUR000 EUR000 EUR000 EUR000
---------- ---------- -------- -------- ----------
Corporate 1,637,888 436,810 21,854 23,239 2,119,791
---------- ---------- -------- -------- ----------
Global corporate 1,452,059 484,240 56,829 21,756 2,014,884
---------- ---------- -------- -------- ----------
SMEs 834,784 193,220 11,441 10,541 1,049,986
---------- ---------- -------- -------- ----------
Retail
---------- ---------- -------- -------- ----------
- housing 2,813,424 335,206 41,381 11,989 3,202,000
---------- ---------- -------- -------- ----------
- consumer, credit cards and
other 749,548 117,430 21,264 16,046 904,288
---------- ---------- -------- -------- ----------
Restructuring
---------- ---------- -------- -------- ----------
- corporate 10,733 29,039 12,459 173 52,404
---------- ---------- -------- -------- ----------
- SMEs 13,706 15,492 28,727 4,105 62,030
---------- ---------- -------- -------- ----------
- retail housing 3,344 18,510 57,076 3,663 82,593
---------- ---------- -------- -------- ----------
- retail other 1,681 4,515 20,449 1,064 27,709
---------- ---------- -------- -------- ----------
Recoveries
---------- ---------- -------- -------- ----------
- corporate - - 29,179 5,817 34,996
---------- ---------- -------- -------- ----------
- SMEs - - 34,796 4,030 38,826
---------- ---------- -------- -------- ----------
- retail housing - - 133,357 22,604 155,961
---------- ---------- -------- -------- ----------
- retail other 72 - 49,220 9,542 58,834
---------- ---------- -------- -------- ----------
International banking services 88,279 43,557 2,380 156 134,372
---------- ---------- -------- -------- ----------
Wealth management 37,279 587 - 375 38,241
---------- ---------- -------- -------- ----------
7,642,79 520,41
7 1,678,606 2 135,100 9,976,915
========== ========== ======== ======== ==========
31 December 2021 Stage Stage Stage POCI Total
1 2 3
By business line EUR000 EUR000 EUR000 EUR000 EUR000
---------- ---------- -------- -------- ----------
Corporate 1,569,699 430,865 22,357 21,485 2,044,406
---------- ---------- -------- -------- ----------
Global corporate 1,374,550 501,092 55,159 22,795 1,953,596
---------- ---------- -------- -------- ----------
SMEs 812,211 215,012 12,522 10,589 1,050,334
---------- ---------- -------- -------- ----------
Retail
---------- ---------- -------- -------- ----------
- housing 2,769,274 320,473 49,633 11,886 3,151,266
---------- ---------- -------- -------- ----------
- consumer, credit cards and
other 732,154 116,983 23,361 16,189 888,687
---------- ---------- -------- -------- ----------
Restructuring
---------- ---------- -------- -------- ----------
- corporate 6,092 35,613 14,255 6,257 62,217
---------- ---------- -------- -------- ----------
- SMEs 14,016 16,417 34,083 5,663 70,179
---------- ---------- -------- -------- ----------
- retail housing 3,075 15,528 62,934 3,547 85,084
---------- ---------- -------- -------- ----------
- retail other 1,409 5,701 24,838 1,050 32,998
---------- ---------- -------- -------- ----------
Recoveries
---------- ---------- -------- -------- ----------
- corporate - - 29,600 6,474 36,074
---------- ---------- -------- -------- ----------
- SMEs - - 35,685 3,632 39,317
---------- ---------- -------- -------- ----------
- retail housing - - 154,469 28,650 183,119
---------- ---------- -------- -------- ----------
- retail other 114 - 51,672 10,424 62,210
---------- ---------- -------- -------- ----------
International banking services 92,193 40,715 2,775 235 135,918
---------- ---------- -------- -------- ----------
Wealth management 43,908 781 - 441 45,130
---------- ---------- -------- -------- ----------
7,418,695 1,699,180 573,343 149,317 9,840,535
========== ========== ======== ======== ==========
F. Notes (continued)
F.5 Analysis of loans and advances to customers by stage (continued)
Loans and advances to customers classified as held for sale
The following tables present the Group's gross loans and
advances to customers at amortised cost classified as held for sale
by stage and by business line concentration.
31 March 2022 Stage Stage Stage POCI Total
1 2 3
By business line EUR000 EUR000 EUR000 EUR000 EUR000
------- ------- -------- ------- --------
Global corporate - - 10,568 - 10,568
------- ------- -------- ------- --------
SMEs - - 247 - 247
------- ------- -------- ------- --------
Restructuring
------- ------- -------- ------- --------
- corporate - - 370 - 370
------- ------- -------- ------- --------
- SMEs - 1,552 2,897 736 5,185
------- ------- -------- ------- --------
- retail housing - 797 16,663 960 18,420
------- ------- -------- ------- --------
- retail other - 549 5,997 571 7,117
------- ------- -------- ------- --------
Recoveries
------- ------- -------- ------- --------
- corporate - - 8,576 699 9,275
------- ------- -------- ------- --------
- SMEs - - 17,637 1,485 19,122
------- ------- -------- ------- --------
- retail housing - - 210,857 39,198 250,055
------- ------- -------- ------- --------
- retail other - - 200,592 35,800 236,392
------- ------- -------- ------- --------
556,
- 2,898 474,404 79,449 751
======= ======= ======== ======= ========
31 December 2021 Stage Stage Stage POCI Total
1 2 3
By business line EUR000 EUR000 EUR000 EUR000 EUR000
------- ------- -------- ------- --------
Global corporate - - 10,470 3 10,473
------- ------- -------- ------- --------
SMEs - - 231 - 231
------- ------- -------- ------- --------
Retail
------- ------- -------- ------- --------
- housing - - 153 - 153
------- ------- -------- ------- --------
- consumer, credit cards and
other - - 2 - 2
------- ------- -------- ------- --------
Restructuring
------- ------- -------- ------- --------
- corporate - - 374 - 374
------- ------- -------- ------- --------
- SMEs - 718 3,842 741 5,301
------- ------- -------- ------- --------
- retail housing - 804 22,113 1,387 24,304
------- ------- -------- ------- --------
- retail other - 553 11,543 606 12,702
------- ------- -------- ------- --------
Recoveries
------- ------- -------- ------- --------
- corporate - - 8,507 694 9,201
------- ------- -------- ------- --------
- SMEs - - 17,653 1,761 19,414
------- ------- -------- ------- --------
- retail housing - - 204,956 37,649 242,605
------- ------- -------- ------- --------
- retail other - - 194,615 36,414 231,029
------- ------- -------- ------- --------
- 2,075 474,459 79,255 555,789
======= ======= ======== ======= ========
F. Notes (continued)
F.6 Credit losses to cover credit risk on loans and advances to customers
Three months ended
31 March
2022 2021
---------- ---------
EUR000 EUR000
---------- ---------
Impairment loss net of reversals on loans and
advances to customers 14,132 23,327
---------- ---------
Recoveries of loans and advances to customers
previously written off (4,066) (2,370)
---------- ---------
Changes in expected cash flows 912 2,787
---------- ---------
Financial guarantees and commitments (270) 384
---------- ---------
10,708 24,128
========== =========
The movement in ECL of loans and advances to customers,
including the loans and advances to customers held for sale, and
the analysis of the balance by stage is as follows:
Three months ended
31 March
2022 2021
--------- ----------
EUR000 EUR000
--------- ----------
1 January 591,417 1,652,635
--------- ----------
Foreign exchange and other adjustments (840) 58
--------- ----------
Write offs (45,959) (73,554)
--------- ----------
Interest (provided) not recognised in the income
statement 4,012 20,994
--------- ----------
Charge for the period 14,132 23,327
--------- ----------
31 March 562,762 1,623,460
========= ==========
Stage 1 16,630 25,954
--------- ----------
Stage 2 28,852 38,097
--------- ----------
Stage 3 456,473 1,357,549
--------- ----------
POCI 60,807 201,860
--------- ----------
31 March 562,762 1,623,460
========= ==========
The allowance for ECL, included above, for loans and advances to
customers held for sale as at 31 March 2022 amounted to EUR308,916
thousand (31 March 2021: EUR822,767 thousand).
The charge on loans and advances to customers , including the
loans and advances to customers held for sale, by stage for the
period is presented in the table below:
Three months ended
31 March
2022 2021
---------- ---------
EUR000 EUR000
---------- ---------
Stage 1 (1,215) (2,777)
---------- ---------
Stage 2 (48) (5,247)
---------- ---------
Stage 3 15,395 31,351
---------- ---------
14,132 23,327
========== =========
During the three months ended 31 March 2022 the total
non--contractual write--offs recorded by the Group amounted to
EUR36,921 thousand ( three months ended 31 March 2021: EUR51,219
thousand). The contractual amount outstanding on financial assets
(including loans and advances to customers classified as held for
sale) that were written off during the three months ended 31 March
2022 and that are still subject to enforcement activity is
EUR348,911 thousand (31 December 2021: EUR984,329 thousand).
F. Notes (continued)
F.6 Credit losses to cover credit risk on loans and advances to customers (continued)
Assumptions have been made about the future changes in property
values, as well as the timing for the realisation of collateral,
taxes and expenses on the repossession and subsequent sale of the
collateral as well as any other applicable haircuts. Indexation has
been used as the basis to estimate updated market values of
properties supplemented by management judgement where necessary
given the difficulty in differentiating between short term impacts
and long-term structural changes and the shortage of market
evidence for comparison purposes. Assumptions were made on the
basis of a macroeconomic scenario for future changes in property
prices, and these are capped to zero, for all scenarios, in case of
any future projected increase, whereas any future projected
decrease is taken into consideration.
At 31 March 2022 the weighted average haircut (including
liquidity haircut and selling expenses) used in the collectively
assessed provision calculation for loans and advances to customers
excluding those classified as held for sale is approximately 32%
under the baseline scenario (31 December 2021: approximately
32%).
The timing of recovery from real estate collaterals used in the
collectively assessed provision calculation for loans and advances
to customers, excluding those classified as held for sale, has been
estimated to be on average seven years under the baseline scenario
(31 December 2021: average seven years).
For the calculation of individually assessed allowances for ECL,
the timing of recovery of collaterals as well as the haircuts used
are based on the specific facts and circumstances of each case.
For the calculation of expected credit losses three scenarios
were used; base, adverse and favourable with 50%, 30% and 20%
probability respectively.
For Stage 3 customers, the base scenario focuses on the
following variables, which are based on the specific facts and
circumstances of each customer: the operational cash flows, the
timing of recovery of collaterals and the haircuts from the
realisation of collateral. The base scenario is used to derive
additional more favourable or more adverse scenarios. Under the
adverse scenario operational cash flows are decreased by 50%,
applied haircuts on real estate collateral are increased by 50% and
the timing of recovery of collaterals is increased by 1 year with
reference to the baseline scenario. Under the favourable scenario,
applied haircuts are decreased by 5%, with no change in the
operational cash flows and in the recovery period with reference to
the baseline scenario. Assumptions used in estimating expected
future cash flows (including cash flows that may result from the
realisation of collateral) reflect current and expected future
economic conditions and are generally consistent with those used in
the Stage 3 collectively assessed exposures. In the case of loans
and advances to customers held for sale the Group has taken into
consideration the timing of the expected sale and the estimated
sale proceeds in determining the ECL. Amounts previously written
off which are expected to be recovered through sale are included in
'Recoveries of loans and advances to customers previously written
off'.
The above assumptions are also influenced by the ongoing
regulatory dialogue BOC PCL maintains with its lead regulator, the
ECB, and other regulatory guidance and interpretations issued by
various regulatory and industry bodies such as the ECB and the EBA,
which provide guidance and expectations as to relevant definitions
and the treatment/classification of certain parameters/assumptions
used in the estimation of allowance for ECL.
Any changes in these assumptions or differences between
assumptions made and actual results could result in significant
changes in the estimated amount of expected credit losses of loans
and advances to customers.
Overlays in the context of COVID--19 and the Ukraine crisis
The majority of COVID--19 pandemic related management overlays
that were applied up to the first six months of 2021 were removed
in the third quarter of 2021, except for the overlay for exposures
in the hotel and catering industry, which applies stricter
customers' credit ratings thresholds for customers in this industry
sector, which remains in place.
In addition, the Group has enhanced provisioning for exposures
that could be impacted from the consequences of the Ukrainian
crisis, by establishing two new overlays, in the collectively
assessed population, to address the increased uncertainties from
the geopolitical instability, trade restrictions, disruptions in
the global supply chains, increases in the energy prices and their
potential negative impact in the domestic cost of living. The
impact on the ECL from the application of these overlays was
approximately a EUR3m charge in the first quarter of 2022.
The Group has exercised critical judgement on a best effort
basis, to consider all reasonable and supportable information
available at the time of the assessment of the ECL allowance as at
31 March 2022. The Group will continue to evaluate the ECL
allowance and the related economic outlook each quarter, so that
any changes arising from the uncertainty on the macroeconomic
outlook and geopolitical developments, impacted by the implications
of the Russian invasion of Ukraine, as well as the degree of
recurrence of the COVID-19 pandemic due to virus mutations, are
timely captured.
F. Notes (continued)
F.6 Credit losses to cover credit risk on loans and advances to customers (continued)
Portfolio segmentation
The individual assessment is performed not only for individually
significant assets but also for other exposures meeting specific
criteria determined by management. The selection criteria for the
individually assessed exposures are based on management judgement
and are reviewed on a quarterly basis by the Risk Management
Division and are adjusted or enhanced, if deemed necessary. The
selection criteria were further enhanced during the three months
ended 31 March 2022, to include significant exposures to customers
with passport of origin or residency in Russia, Ukraine or Belarus
and/or business activity within these countries.
F.7 Rescheduled loans and advances to customers
The below table presents the Group's rescheduled loans and
advances to customers by stage, excluding those classified as held
for sale.
31 March 31 December
2022 2021
EUR000 EUR000
---------- ------------
Stage 1 - 6,883
---------- ------------
Stage 2 821,997 828,849
---------- ------------
Stage 3 326,075 348,385
---------- ------------
POCI 30,521 39,613
---------- ------------
1,178,593 1,223,730
========== ============
F.8 Pending litigation, claims, regulatory and other matters
The Group, in the ordinary course of business, is involved in various
disputes and legal proceedings and is subject to enquiries and examinations,
requests for information, audits, investigations, legal and other
proceedings by regulators, governmental and other public bodies,
actual and threatened, relating to the suitability and adequacy of
advice given to clients or the absence of advice, lending and pricing
practices, selling and disclosure requirements, record keeping, filings
and a variety of other matters. In addition, as a result of the deterioration
of the Cypriot economy and banking sector in 2012 and the subsequent
restructuring of BOC PCL in 2013 as a result of the bail-in Decrees,
BOC PCL is subject to a large number of proceedings and investigations
that either precede, or result from the events that occurred during
the period of the bail--in Decrees. There are also situations where
the Group may enter into a settlement agreement. This may occur only
if such settlement is in BOC PCL's interest (such settlement does
not constitute an admission of wrongdoing) and only takes place after
obtaining legal advice and all approvals by the appropriate bodies
of management.
Provisions have been recognised for those cases where the Group is
able to estimate probable losses. Where an individual provision is
material, the fact that a provision has been made is stated. Any
provision recognised does not constitute an admission of wrongdoing
or legal liability. While the outcome of these matters is inherently
uncertain, management believes that, based on the information available
to it, appropriate provisions have been made in respect of legal
proceedings and regulatory and other matters as at 31 March 2022
and hence it is not believed that such matters, when concluded, will
have a material impact upon the financial position of the Group.
Details on the material ongoing cases are disclosed within the 2021
Annual Financial Report.
The Association for the Protection of Bank Borrowers (CYPRODAT)
filed a complaint with the Commission for the Protection of
Competition (CPC) in January 2022, claiming that BOC PCL and
another bank have concerted in practices regarding the recent
revisions of their commissions and charges. It also filed an
application for an interim order which, if successful, would
essentially freeze the implementation of the revised commissions
and charges. The application for interim order was rejected by the
CPC, however, the CPC reverted in April 2022 to inform BOC PCL of
the initiation of an investigation with respect to this matter.
This investigation is currently at a very early stage to predict
its outcome.
G. Additional Risk & Capital Management disclosures
G.1 Additional Credit risk disclosures
The tables below present the analysis of loans and advances to
customers in accordance with the EBA standards.
31 March 2022 Gross loans and advances to customers Accumulated impairment, accumulated negative
changes in fair value due to credit risk
and provisions
Group Of which Of which exposures Accumulated Of Of which exposures
gross NPEs with forbearance impairment, which with forbearance
customer measures accumulated NPEs measures
loans negative
and changes
advances(1,2) in fair
value
due to
credit
risk and
provisions
-------------- ---------- ----------------------- ------------ -------- -----------------------
Total Of which Total Of which
exposures NPEs exposures on NPEs
with with
forbearance forbearance
measures measures
-------------- ---------- ------------ --------- ------------ -------- ------------ ---------
EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000
-------------- ---------- ------------ --------- ------------ -------- ------------ ---------
Loans and
advances
to customers
-------------- ---------- ------------ --------- ------------ -------- ------------ ---------
General
governments 47,524 - - - 34 - - -
-------------- ---------- ------------ --------- ------------ -------- ------------ ---------
Other financial
corporations 160,168 3,598 11,586 3,469 4,522 1,546 1,671 1,444
-------------- ---------- ------------ --------- ------------ -------- ------------ ---------
Non-financial
corporations 5,315,131 266,452 1,015,983 205,241 142,704 116,205 87,096 79,127
-------------- ---------- ------------ --------- ------------ -------- ------------ ---------
Of which: Small
and
Medium sized
Enterprises(3)
(SMEs) 4,202,199 117,419 729,967 65,973 79,479 58,558 35,742 29,771
-------------- ---------- ------------ --------- ------------ -------- ------------ ---------
Of which:
Commercial
real estate(3) 3,945,007 157,068 888,216 125,956 93,769 78,546 67,161 62,146
-------------- ---------- ------------ --------- ------------ -------- ------------ ---------
Non-financial
corporations
by sector
-------------- ---------- ------------ --------- ------------ -------- ------------ ---------
Construction 576,899 28,025 22,734
-------------- ---------- ------------ --------- ------------ -------- ------------ ---------
Wholesale and
retail
trade 944,739 35,785 24,879
-------------- ---------- ------------ --------- ------------ -------- ------------ ---------
Accommodation
and food
service
activities 1,157,721 4,298 4,594
-------------- ---------- ------------ --------- ------------ -------- ------------ ---------
Real estate
activities 1,123,074 103,789 32,283
-------------- ---------- ------------ --------- ------------ -------- ------------ ---------
Manufacturing 379,496 15,802 8,842
-------------- ---------- ------------ --------- ------------ -------- ------------ ---------
Other sectors 1,133,202 78,753 49,372
-------------- ---------- ------------ --------- ------------ -------- ------------ ---------
Households 4,753,135 380,226 380,275 220,005 124,501 106,179 63,902 57,710
-------------- ---------- ------------ --------- ------------ -------- ------------ ---------
Of which:
Residential
mortgage
loans(3) 3,739,377 321,182 329,433 192,014 85,084 77,337 49,514 45,458
-------------- ---------- ------------ --------- ------------ -------- ------------ ---------
Of which:
Credit for
consumption(3) 570,915 51,636 57,083 30,323 27,463 20,779 12,779 11,138
-------------- ---------- ------------ --------- ------------ -------- ------------ ---------
10,275,958 650,276 1,407,844 428,715 271,761 223,930 152,669 138,281
-------------- ---------- ------------ --------- ------------ -------- ------------ ---------
Loans and
advances
to customers
classified
as held for
sale 556,751 553,780 245,561 242,804 308,916 308,022 119,661 118,803
-------------- ---------- ------------ --------- ------------ -------- ------------ ---------
Total
on-balance
sheet 10,832,709 1,204,056 1,653,405 671,519 580,677 531,952 272,330 257,084
============== ========== ============ ========= ============ ======== ============ =========
1 Excluding loans and advances to central banks and credit
institutions.
2 The residual fair value adjustment on initial recognition
(which relates mainly to loans acquired from Laiki Bank and is
calculated as the difference between the outstanding contractual
amount and the fair value of loans acquired and bears a negative
balance) is considered as part of the gross loans, therefore
decreases the gross balance of loans and advances to customers.
3 The analysis shown in lines 'non-financial corporations' and
'households' is non-additive across categories as certain customers
could be in both categories.
G. Additional Risk & Capital Management disclosures (continued)
G.1 Additional Credit risk disclosures (continued)
Gross loans and advances to customers Accumulated impairment, accumulated negative
changes in fair value due to credit risk
and provisions
Group Of which Of which exposures Accumulated Of Of which exposures
gross NPEs with forbearance impairment, which with forbearance
customer measures accumulated NPEs measures
loans negative
and changes in
advances(4,5) fair value
due to
credit
risk and
provisions
-------------- ---------- ----------------------- ------------ -------- -----------------------
Total Of which Total Of which
exposures NPEs exposures on NPEs
with with
31 December forbearance forbearance
2021 measures measures
-------------- ---------- ------------ --------- ------------ -------- ------------ ---------
EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000
-------------- ---------- ------------ --------- ------------ -------- ------------ ---------
Loans and
advances
to customers
-------------- ---------- ------------ --------- ------------ -------- ------------ ---------
General
governments 45,357 - - - 29 - - -
-------------- ---------- ------------ --------- ------------ -------- ------------ ---------
Other financial
corporations 127,889 4,771 12,759 4,487 3,393 1,909 1,948 1,658
-------------- ---------- ------------ --------- ------------ -------- ------------ ---------
Non-financial
corporations 5,209,599 277,309 1,009,094 215,157 144,252 115,869 86,847 79,329
-------------- ---------- ------------ --------- ------------ -------- ------------ ---------
Of which: Small
and
Medium sized
Enterprises(6) 4,052,571 123,558 734,362 71,269 83,757 60,892 39,263 32,499
-------------- ---------- ------------ --------- ------------ -------- ------------ ---------
Of which:
Commercial
real estate(6) 3,968,375 171,215 900,697 136,257 100,301 82,872 69,309 64,282
-------------- ---------- ------------ --------- ------------ -------- ------------ ---------
Non-financial
corporations
by sector
-------------- ---------- ------------ --------- ------------ -------- ------------ ---------
Construction 512,952 28,418 21,224
-------------- ---------- ------------ --------- ------------ -------- ------------ ---------
Wholesale and
retail
trade 964,891 40,457 28,586
-------------- ---------- ------------ --------- ------------ -------- ------------ ---------
Accommodation
and food
service
activities 1,137,443 4,323 3,351
-------------- ---------- ------------ --------- ------------ -------- ------------ ---------
Real estate
activities 1,210,664 106,841 31,821
-------------- ---------- ------------ --------- ------------ -------- ------------ ---------
Manufacturing 326,535 14,354 8,094
-------------- ---------- ------------ --------- ------------ -------- ------------ ---------
Other sectors 1,057,114 82,916 51,176
-------------- ---------- ------------ --------- ------------ -------- ------------ ---------
Households 4,755,100 434,041 430,007 238,066 153,865 136,902 70,667 64,589
-------------- ---------- ------------ --------- ------------ -------- ------------ ---------
Of which:
Residential
mortgage
loans(6) 3,734,448 369,147 372,141 208,387 112,711 105,764 56,145 52,219
-------------- ---------- ------------ --------- ------------ -------- ------------ ---------
Of which:
Credit for
consumption(6) 581,197 54,238 61,824 31,165 28,824 22,167 13,290 11,430
-------------- ---------- ------------ --------- ------------ -------- ------------ ---------
10,137,945 716,121 1,451,860 457,710 301,539 254,680 159,462 145,576
-------------- ---------- ------------ --------- ------------ -------- ------------ ---------
Loans and
advances
to customers
classified
as held for
sale 555,789 553,619 245,452 243,495 305,419 304,665 118,094 117,377
-------------- ---------- ------------ --------- ------------ -------- ------------ ---------
Total
on-balance
sheet 10,693,734 1,269,740 1,697,312 701,205 606,958 559,345 277,556 262,953
============== ========== ============ ========= ============ ======== ============ =========
4 Excluding loans and advances to central banks and credit
institutions.
5 The residual fair value adjustment on initial recognition
(which relates mainly to loans acquired from Laiki Bank and is
calculated as the difference between the outstanding contractual
amount and the fair value of loans acquired and bears a negative
balance) is considered as part of the gross loans, therefore
decreases the gross balance of loans and advances to customers.
6 The analysis shown in lines 'non-financial corporations' and
'households' is non-additive across categories as certain customers
could be in both categories.
G. Additional Risk & Capital Management disclosures (continued)
G.2 Capital management
The primary objective of the Group's capital management is to
ensure compliance with the relevant regulatory capital requirements
and to maintain healthy capital adequacy ratios to cover the risks
of its business and support its strategy and maximise shareholders'
value.
The capital adequacy framework, as in force, was incorporated
through the Capital Requirements Regulation (CRR) and Capital
Requirements Directive (CRD) which came into effect on 1 January
2014 with certain specified provisions implemented gradually. The
CRR and CRD transposed the new capital, liquidity and leverage
standards of Basel III into the European Union's legal framework.
CRR establishes the prudential requirements for capital, liquidity
and leverage for credit institutions. It is directly applicable in
all EU member states. CRD governs access to deposit-taking
activities and internal governance arrangements including
remuneration, board composition and transparency. Unlike the CRR,
member states were required to transpose the CRD into national law
and national regulators were allowed to impose additional capital
buffer requirements.
On 27 June 2019, the revised rules on capital and liquidity
(Regulation (EU) 2019/876 (CRR II) and Directive (EU) 2019/878 (CRD
V)) came into force. As an amending regulation, the existing
provisions of CRR apply, unless they are amended by CRR II. Certain
provisions took immediate effect (primarily relating to Minimum
Requirement for Own Funds and Eligible Liabilities (MREL)), but
most changes became effective as of June 2021. The key changes
introduced consist of, among others, changes to qualifying criteria
for Common Equity Tier 1 (CET1), Additional Tier 1 (AT1) and Tier 2
(T2) instruments, introduction of requirements for MREL and a
binding Leverage Ratio requirement (as defined in the CRR) and a
Net Stable Funding Ratio (NSFR).
The amendments that came into effect on 28 June 2021 are in
addition to those introduced in June 2020 through Regulation (EU)
2020/873, which among other, brought forward certain CRR II changes
in light of the COVID--19 pandemic. The main adjustments of
Regulation (EU) 2020/873 that had an impact on the Group's capital
ratio relate to the acceleration of the implementation of the new
SME discount factor (lower RWAs), extending the IFRS 9 transitional
arrangements and introducing further relief measures to CET1
allowing to fully add back to CET1 any increase in ECL recognised
in 2020 and 2021 for non-credit impaired financial assets and
phasing in this starting from 2022 and advancing the application of
prudential treatment of software assets as amended by CRR II (which
came into force in December 2020). In addition, Regulation (EU)
2020/873 introduced a temporary treatment of unrealized gains and
losses on exposures to central governments, to regional governments
or to local authorities measured at fair value through other
comprehensive income which the Group elected to apply and
implemented from the third quarter of 2020.
In October 2021, the European Commission adopted legislative
proposals for further amendments to CRR, CRD IV and the BRRD (the
'2021 Banking Package'). Amongst other things, the 2021 Banking
Package would implement certain elements of Basel III that have not
yet been transposed into EU law. The 2021 Banking Package
includes:
-- a proposal for a Regulation (sometimes known as 'CRR III') to
make amendments to CRR with regard to (amongst other things)
requirements on credit risk, credit valuation adjustment risk,
operational risk, market risk and the output floor;
-- a proposal for a Directive (sometimes known as 'CRD VI') to
make amendments to CRD IV with regard to (amongst other things)
requirements on supervisory powers, sanctions, third-country
branches and ESG risks; and
-- a proposal for a Regulation to make amendments to CRR and the
BRRD with regard to (amongst other things) requirements on the
prudential treatment of G-SII groups with a multiple point of entry
resolution strategy and a methodology for the indirect subscription
of instruments eligible for meeting the MREL requirements.
The 2021 Banking Package is subject to amendment in the course
of the EU's legislative process; and its scope and terms may change
prior to its implementation. In addition, in the case of the
proposed amendments to CRD IV and the BRRD, their terms and effect
will depend, in part, on how they are transposed in each member
state. As a general matter, it is likely to be several years until
the 2021 Banking Package begins to be implemented (currently
expected in 2025); and certain measures are expected to be subject
to transitional arrangements or to be phased in over time.
The CET1 ratio of the Group as at 31 March 2022 stands at 14.64%
and the Total Capital ratio at 19.56% on a transitional basis. The
ratios as at 31 March 2022 include unaudited/un-reviewed profits
for the three months ended 31 March 2022.
G. Additional Risk & Capital Management disclosures (continued)
G.2 Capital management (continued)
Minimum CET1 Regulatory Capital Requirements 202 2 202 1
Pillar I - CET1 Requirement 4.50% 4.50%
------- ------
Pillar II - CET1 Requirement 1.83% 1.69%
------- ------
Capital Conservation Buffer (CCB)* 2.50% 2.50%
------- ------
Other Systematically Important Institutions
(O-SII) Buffer 1.25% 1.00%
------- ------
Minimum CET1 Regulatory Requirements 10.08% 9.69%
======= ======
* Fully phased in as of 1 January 2019
Minimum Total Capital Regulatory Requirements 2022 2021
Pillar I - Total Capital Requirement 8.00% 8.00%
------- -------
Pillar II - Total Capital Requirement 3.26% 3.00%
------- -------
Capital Conservation Buffer (CCB) * 2.50% 2.50%
------- -------
Other Systematically Important Institutions
(O-SII) Buffer 1.25% 1.00%
------- -------
Minimum Total Capital Regulatory Requirements 15.01% 14.50%
======= =======
* Fully phased in as of 1 January 2019
The minimum Pillar I total capital requirement ratio is 8.00%
and may be met, in addition to the 4.50% CET1 requirement, with up
to 1.50% by AT1 capital and with up to 2.00% by T2 capital.
The Group is also subject to additional capital requirements for
risks which are not covered by the Pillar I capital requirements
(Pillar II add-ons). Applicable Regulation allows a part of the
said Pillar II Requirements (P2R) to be met also with AT1 and T2
capital and does not require solely the use of CET1.
The ECB has also provided non-public guidance for an additional
Pillar II CET1 buffer ( P2G) .
In the context of the annual SREP conducted by the ECB in 2021
and based on the final 2021 SREP decision received in February
2022, the P2R was set at 3.26%, compared to the previous level of
3.00%. The additional P2R add-on of 0.26% relates to ECB's
prudential provisioning expectations as per the 2018 ECB Addendum
and subsequent ECB announcements and press release in July 2018 and
August 2019. This component of the P2R add-on takes into
consideration Project Helix 3. It is dynamic and can be reduced
during 2022 on the basis of in-scope NPEs and level of
provisioning. The ECB has also provided revised lower non-public
guidance for an additional Pillar II CET1 buffer. The new SREP
requirements are effective from 1 March 2022.
The Group is subject to a 3% Pillar I Leverage Ratio
requirement.
The above minimum ratios apply for both BOC PCL and the
Group.
The capital position of the Group and BOC PCL as at 31 March
2022 exceeds both their Pillar I and their Pillar II add-on capital
requirements. However, the Pillar II add-on capital requirements
are a point-in-time assessment and therefore are subject to change
over time.
The CBC, in accordance with the Macroprudential Oversight of
Institutions Law of 2015, sets, on a quarterly basis, the CCyB
rates in accordance with the methodology described in this law. The
CBC has set the level of the CCyB rate for risk weighted exposures
in Cyprus at 0.00% for the year 2021 as well as for the six months
up to June 2022. The CCyB for the Group as at 31 March 2022 has
been calculated at 0.00%.
In accordance with the provisions of this law, the CBC is also
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. BOC PCL has been designated as an O-SII and the
CBC initially set the O-SII Buffer at 2.00%, revised to 1.50% in
November 2021 with effect from 1 January 2022. This buffer is being
phased in gradually, having started from 1 January 2019 at 0.50%
and increasing by 0.50% every year thereafter, until being fully
implemented. In April 2020, the CBC decided to delay the phasing in
of the O-SII Buffer on 1 January 2021 and 1 January 2022 by 12
months. Consequently, and following the revision to 1.50%, the
O-SII Buffer will be fully phased in on 1 January 2023, instead of
1 January 2022 as originally set, by 0.25% each year.
G. Additional Risk & Capital Management disclosures (continued)
G.2 Capital management (continued)
The 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
(P2G) 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.
As part of the relaxation measures following the COVID-19
outbreak, on 12 March 2020, the ECB and the EBA also announced that
banks are temporarily allowed to operate below the level of capital
defined by Pillar II Guidance (P2G), the CCB and the CCyB. In July
2020, the ECB committed to allow banks to operate below P2G and the
CBR until end of 2022, without automatically triggering supervisory
actions. In February 2022, the ECB announced that it will not allow
banks to operate below the level of capital defined by their P2G
beyond December 2022.
The insurance subsidiaries of the Group, the General Insurance
of Cyprus Ltd and Eurolife Ltd, comply with the requirements of the
Superintendent of Insurance including the minimum solvency ratio.
The regulated UCITS management company of the Group, BOC Asset
Management Ltd, complies with the regulatory capital requirements
of the Cyprus Securities & Exchange Commission (CySEC) laws and
regulations. The regulated investment firm (CIF) of the Group, The
Cyprus Investment and Securities Corporation Ltd (CISCO), complies
with the minimum capital adequacy ratio requirements. From 2021 the
new prudential regime for Investment Firms ('IFs') as per the
Investment Firm Regulation (EU) 2019/2033 ('IFR') on the prudential
requirements of IFs and the Investment Firm Directive (EU)
2019/2034 ('IFD') on the prudential supervision of IFs came into
effect. Under the new regime CISCO has been classified as
Non-Systemic 'Class 2' company. Class 2 IFs are subject to the new
IFR/IFD regime in full.
The capital position of the Group and BOC PCL as at the
reporting date (after applying the transitional arrangements) is
presented below:
Regulatory capital Group BOC PCL
31 March 31 December 31 March 31 December
2022(7) 2021(8) 2022(7) 2021(8)
----------- ------------ ----------- ------------
EUR000 EUR000 EUR000 EUR000
----------- ------------ ----------- ------------
Transitional Common Equity
Tier 1 (CET1 )(9) 1,545,521 1,619,559 1,528,089 1,592,455
----------- ------------ ----------- ------------
Transitional Additional
Tier 1 capital (AT1) 220,000 220,000 220,000 220,000
----------- ------------ ----------- ------------
Tier 2 capital (T2) 300,000 300,000 300,000 300,000
----------- ------------ ----------- ------------
Transitional total regulatory
capital 2,065,521 2,139,559 2,048,089 2,112,455
=========== ============ =========== ============
Risk weighted assets -
credit risk(10) 9,543,190 9,678,741 9,570,794 9,697,351
----------- ------------ ----------- ------------
Risk weighted assets - - - - -
market risk
----------- ------------ ----------- ------------
Risk weighted assets -
operational risk 1,015,488 1,015,488 995,450 995,450
----------- ------------ ----------- ------------
Total risk weighted assets 10,558,678 10,694,229 10,566,244 10,692,801
=========== ============ =========== ============
Transitional % % % %
----------- ------------ ----------- ------------
Common Equity Tier 1 ratio 14.64 15.14 14.46 14.89
----------- ------------ ----------- ------------
Total Capital ratio 19.56 20.01 19.38 19.76
----------- ------------ ----------- ------------
Leverage ratio 7.12 7.45 7.05 7.35
----------- ------------ ----------- ------------
7 Includes unaudited/un-reviewed profits for the three months
ended 31 March 2022.
8 As per 2021 Annual Financial Report and Pillar III Disclosures
for the year ended December 2021.
9 CET1 includes regulatory deductions, comprising, amongst
others, intangible assets amounting to EUR28,921 thousand for the
Group and EUR25,221 thousand for BOC PCL as at 31 March 2022 (31
December 2021: EUR30,032 thousand for the Group and EUR26,452
thousand for BOC PCL). As at 31 March 2022 an amount of EUR14,669
thousand is considered prudently valued for CRR purposes and it is
not deducted from CET1 (31 December 2021: EUR15,394 thousand).
10 Includes Credit Valuation Adjustments (CVA).
G. Additional Risk & Capital Management (continued)
G.2 Capital management (continued)
The capital ratios of the Group and BOC PCL as at the reporting
date on a fully loaded basis are presented below:
Fully loaded Group BOC PCL
31 March 31 December 31 March 31 December
2022(7,11) 2021(8,11) 2022(7,11) 2021(8,11)
------------ ------------ ------------ ------------
% % % %
------------ ------------ ------------ ------------
Common Equity Tier 1 ratio 13.92 13.75 13.74 13.49
------------ ------------ ------------ ------------
Total capital ratio 18.88 18.69 18.70 18.43
------------ ------------ ------------ ------------
Leverage ratio 6.79 6.80 6.72 6.70
------------ ------------ ------------ ------------
During the three months ended 31 March 2022 CET1 ratio was
negatively affected mainly by the phasing in of IFRS 9 and other
transitional adjustments on 1 January 2022, provisions and
impairments and other movements, and was positively affected by
pre-provision income and the decrease in risk-weighted assets. As a
result, the CET1 ratio has decreased by 50 bps during the three
months ended 31 March 2022.
The ECB, as part of its supervisory role, 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 which will decrease based on BOC PCL's progress
in disposing the properties in scope. The amount is being directly
deducted from own funds since 30 June 2021. There was no
significant movement in the amount deducted since 31 December 2021.
As a result of the prudential charge deducted from own funds as at
31 March 2022, the impact on the Group's CET1 ratio is 36 bps.
In April 2021, the Company issued EUR300 million unsecured and
subordinated Tier 2 Capital Notes (the 'New T2 Notes') and
immediately after, the Company and BOC PCL entered into an
agreement pursuant to which the Company on-lent to BOC PCL the
entire EUR300 million proceeds of the issue of the New T2 Notes on
terms substantially identical to the terms and conditions of the
New T2 Notes. At the same time, BOC PCL invited the holders of its
EUR250 million Fixed Rate Reset Tier 2 Capital Notes due January
2027 (the 'Old T2 Notes') to tender their Old T2 Notes for purchase
by BOC PCL, after which Old T2 Notes of EUR43 million remained
outstanding.
At a meeting held on 30 November 2021, the Board of Directors
resolved to exercise BOC PCL's option to redeem the remaining
nominal amount outstanding of the Old T2 Notes. The outstanding Old
T2 Notes were redeemed on 19 January 2022.
Transitional arrangements
The Group has elected in prior years to apply the
'static-dynamic' approach in relation to the transitional
arrangements for the initial application of IFRS 9 for regulatory
capital purposes, where the impact on the impairment amount from
the initial application of IFRS 9 on the capital ratios is phased
in gradually. The 'static-dynamic' approach allows for
recalculation of the transitional adjustment periodically on Stage
1 and Stage 2 loans, to reflect the increase of the ECL provisions
within the transition period. The Stage 3 ECL remains static over
the transition period as per the impact upon initial
recognition.
The amount added each year for the 'static component' 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 cumulative
impact on the capital position as at 31 December 2021 was 50% and
as at 31 March 2022 was 75% of the impact on the impairment amounts
from the initial application of IFRS 9. This will be fully phased
in (100%) by 1 January 2023.
Following the June 2020 amendments to the CRR in relation to the
dynamic component a 100% add back of IFRS 9 provisions was 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 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.
11 IFRS 9 and application of the temporary treatment of certain
FVOCI instruments in accordance with Article 468 of CRR fully
loaded.
G. Additional Risk & Capital Management disclosures (continued)
G.2 Capital management (continued)
In relation to the temporary treatment of unrealized gains and
losses for certain exposures measured at fair value through other
comprehensive income, Regulation EU 2020/873 allows institutions to
remove from their CET1 the amount of unrealized gains and losses
accumulated since 31 December 2019, excluding those of financial
assets that are credit-impaired. The relevant amount is removed at
a scaling factor of 100% from January to December 2020, reduced to
70% from January to December 2021 and to 40% from January to
December 2022. The Group applies the temporary treatment from the
third quarter of 2020.
Minimum Requirement for Own Funds and Eligible Liabilities
(MREL)
In December 2021, BOC PCL received notification from the SRB and
CBC of the final decision for the binding MREL for BOC PCL,
determined as the preferred resolution point of entry. As per the
decision, the final MREL requirement is set at 23.74% of risk
weighted assets and 5.91% of Leverage Ratio Exposure (LRE) (as
defined in the CRR) and must be met by 31 December 2025.
Furthermore, BOC PCL 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 BOC PCL to meet the Combined Buffer Requirement
(CBR) are not eligible to meet its MREL requirements expressed in
terms of risk weighted assets. BOC PCL must comply with the MREL
requirement at the consolidated level, comprising BOC PCL and its
subsidiaries. The decision is subject to annual review by the
competent authorities.
The MREL ratio calculated according to the SRB's eligibility
criteria currently in effect, and based on internal estimate, stood
at 18.69% of RWAs as at 31 March 2022 and at 9.54% of LRE as at 31
March 2022. The ratios as at 31 March 2022 include
unaudited/un-reviewed profits for the three months ended 31 March
2022. The MREL ratio expressed as a percentage of RWAs does not
include capital used to meet the CBR amount which stood at 3.75% as
at 31 March 2022 and is expected to increase to 4.00% on 1 January
2023.
The MREL requirement is in line with BOC PCL's expectations and
funding plans.
G.3 Internal Capital Adequacy Assessment Process (ICAAP),
Internal Liquidity Assessment Process (ILAAP), Pillar II and
Supervisory Review and Evaluation Process (SREP)
The Group prepares annual ICAAP and ILAAP packages. Both reports
for 2021 have been completed and submitted to the ECB at the end of
April 2022 following approval by the Board of Directors.
The Group also undertakes quarterly reviews of its ICAAP results
(with reference date 30 June and 30 September) as well as on an
ad-hoc basis if needed, which are submitted to the ALCO and the
Risk Committee of the Board of Directors, considering the latest
actual and forecasted information. During the quarterly review, the
Group's risk profile and risk management policies are reviewed and
any material changes/developments since the annual ICAAP exercise
are assessed in terms of capital adequacy. Both the annual ICAAP
for 2021 and the quarterly ICAAP reviews, undertaken in 2021,
indicated that the Group has sufficient capital and available
mitigants to support its risk profile and its business and to
enable it to meet its regulatory requirements, both under a
baseline and stress conditions scenarios.
The Group also undertakes a quarterly review for the ILAAP
through quarterly stress tests submitted to the ALCO and the Risk
Committee of the Board of Directors. Any material changes since the
year-end are assessed in terms of liquidity and funding. The
quarterly review identifies whether the Group has an adequate
liquidity buffer to cover the stress outflows. The Group's ILAAP
analysis demonstrates that the volume and capacity of liquidity
resources available to the Group are adequate. Both the annual
ILAAP for 2021 and the quarterly ILAAP reviews, undertaken in 2021,
indicated that BOC PCL's liquidity position is at a very
comfortable level. BOC PCL maintains liquidity resources which are
adequate to ensure its ability to meet obligations as they fall due
under ordinary and stressed conditions.
The ECB, as part of its supervisory role, has been conducting
the SREP and other inspections (onsite/ off-site/ targeted reviews/
deep-dives) on the Group. SREP is a holistic assessment of, amongst
other things, the Group's business model, internal governance and
institution-wide control arrangements, risks to capital and
adequacy of capital to cover these risks and risks to liquidity and
adequacy of liquidity resources to cover these risks. The objective
of the SREP is for the ECB to form an up-to-date supervisory view
of the Group's risks and viability and to form the basis for
supervisory measures and dialogue with the Group. As a result of
these supervisory processes, additional capital and other
requirements could be imposed on the Group, including a revision of
the level of Pillar II add-ons as the Pillar II add-ons capital
requirements are a point-in-time assessment and therefore subject
to change over time.
The Group is participating in 2022 in the ECB supervisory
Climate Risk Stress Test that will assess how prepared banks are
for dealing with financial and economic shocks stemming from
climate risk. ECB considers the test as a learning exercise for
banks and supervisors alike. It aims to identify vulnerabilities,
best practices and challenges banks face when managing
climate-related risk. This is not a pass-or-fail exercise, nor does
it have direct implications for banks' capital levels. The results
will feed into the Supervisory Review and Evaluation Process (SREP)
from a qualitative point of view.
G. Additional Risk & Capital Management disclosures (continued)
G.4 Liquidity regulation
The Group has to comply with provisions on the Liquidity
Coverage Ratio (LCR) under CRD IV/CRR (as supplemented by Delegated
Regulations (EU) 2015/61), with the limit set at 100%. The Group
has to also comply with the Net Stable Funding Ratio (NSFR)
calculated as per the Capital Requirements Regulation II (CRR II),
with the limit set at 100%.
The LCR is designed to promote the short-term resilience of a
Group's liquidity risk profile by ensuring that it has sufficient
high-quality liquid resources to survive an acute stress scenario
lasting for 30 days. The NSFR has been developed to promote a
sustainable maturity structure of assets and liabilities.
As at 31 March 2022, the Group was in compliance with all
regulatory liquidity requirements. As at 31 March 2022, the LCR
stood at 296% for the Group (compared to 298% at 31 December 2021)
and was in compliance with the minimum regulatory requirement of
100%. As at 31 March 2022 the Group's NSFR was 145% (compared to
147% at 31 December 2021) and was in compliance with the minimum
regulatory requirement of 100%.
G.5 Liquidity reserves
The below table sets out the Group's liquidity reserves:
Composition of 31 March 2022 31 December 2021
the liquidity
reserves
Internal Liquidity reserves Internal Liquidity reserves
Liquidity as per LCR Delegated Liquidity as per LCR Delegated
reserves Reg (EU) reserves Reg (EU)
2015/61 LCR eligible 2015/61 LCR eligible
----------- ------------------------ ----------- ------------------------
Level Level Level Level
1 2A 1 2A
----------- ------------- --------- ----------- ------------- ---------
EUR000 EUR000 EUR000 EUR000 EUR000 EUR000
----------- ------------- --------- ----------- ------------- ---------
Cash and balances
with central banks 9,163,111 9,163,111 - 9,064,840 9,064,840 -
----------- ------------- --------- ----------- ------------- ---------
Placements with
banks 105,865 - - 118,752 - -
----------- ------------- --------- ----------- ------------- ---------
Liquid investments 511,099 358,882 97,699 500,930 304,758 147,562
----------- ------------- --------- ----------- ------------- ---------
Available ECB
Buffer 44,851 - - 80,786 - -
----------- ------------- --------- ----------- ------------- ---------
Total 9,824,926 9,521,993 97,699 9,765,308 9,369,598 147,562
=========== ============= ========= =========== ============= =========
Internal Liquidity Reserves present the total liquid assets as
defined in BOC PCL's Liquidity Policy. Liquidity reserves as per
LCR Delegated Regulation (EU) 2015/61 present the liquid assets as
per the definition of the aforementioned regulation i.e.
High-Quality Liquid Assets (HQLA).
Under Liquidity reserves as per LCR, balances in Nostro accounts
and placements with banks are not included, as they are not
considered HQLA (they are part of the LCR Inflows).
Liquid investments under the Liquidity reserves as per LCR are
shown at market values reduced by standard weights as prescribed by
the LCR regulation. Liquid investments under Internal Liquidity
Reserves include additional unencumbered liquid bonds and are shown
at market values net of haircuts based on ECB methodology and
haircuts.
Current available ECB buffer is not part of the Liquidity
reserves as per LCR.
Following 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 fulfill their role in funding the real economy. A
high-level description of the main measures which have a direct or
indirect impact on the liquidity position of banks is set out
below.
One of the measures announced, was that ECB would allow banks to
operate below the defined level of 100% of the LCR. This measure
was abolished at the end of 2021. The set of collateral easing
measures adopted, resulted in increasing BOC PCL's borrowing
capacity from the ECB operations and improving the liquidity
buffers due to the lower haircuts applied to the ECB eligible
collateral, that comprises of bonds and Additional Credit Claims
(ACC). In relation to existing collateral, the ECB announced
changes in collateral rules, temporarily accepting collaterals with
a rating below investment grade, setting however a minimum
acceptable rating level. The collateral easing packages are
designed as temporary measures, with the exception of part of the
haircut reduction on ACCs which is permanent. In March 2022, the
ECB announced the steps for the gradual phasing out of the
temporary pandemic collateral easing measures. The phasing out will
be concluded in three steps starting from July 2022 and will be
completed by March 2024.
G. Additional Risk & Capital Management disclosures (continued)
G.5 Liquidity reserves (continued)
The package also contained measures that provided liquidity
support to the euro area financial system, such as significant
favourable amendments in the terms and characteristics of TLTRO
III. The favourable TLTRO III borrowing terms are not expected to
be extended post June 2022. Furthermore, a new series of additional
longer-term refinancing operations, called Pandemic Emergency
Longer-Term Refinancing Operations (PELTROs), was introduced. The
last TLTRO III and PELTROs operations took place in December
2021.
H. Definitions & Explanations
Reconciliations of Alternative Performance Measures
Reconciliations between the calculations of non-IFRS performance
measures and the most directly comparable IFRS measures which allow
for the comparability of the underlying basis to statutory
information are disclosed below:
1. (a) Reconciliation of Gross loans and advances to customers
31 March 31 December
2022 2021
EUR000 EUR000
=========== ============
Gross loans and advances to customers as
per the underlying basis (as defined below) 10,964,417 10,856,660
=========== ============
Reconciling items:
=========== ============
Residual fair value adjustment on initial
recognition (Note 1 below) (99,459) (105,678)
=========== ============
Gross loans and advances to customers at
amortised cost classified as held for sale (556,751) (555,789)
=========== ============
Residual fair value adjustment on initial
recognition on loans and advances to customers
classified as held for sale (Note 1 below) (19,092) (19,090)
=========== ============
Loans and advances to customers measured
at fair value through profit or loss (Section
F.3) (281,128) (281,868)
=========== ============
Aggregate fair value adjustment on loans
and advances to customers measured at fair
value through profit or loss (31,072) (53,700)
----------- ------------
Gross loans and advances to customers at
amortised cost as per Section F.3 9,976,915 9,840,535
=========== ============
1. (b) Reconciliation of Gross Loans and advances to customers classified as held for sale
31 March 31 December
2022 2021
EUR000 EUR000
========= ============
Gross loans and advances to customers classified
as held for sale as per the underlying basis 575,843 574,879
========= ============
Reconciling items:
========= ============
Residual fair value adjustment on initial
recognition on loans and advances to customers
classified as held for sale (Note 1 below) (19,092) (19,090)
========= ============
Loans and advances to customers classified
as held for sale as per Section F.4 556,751 555,789
========= ============
H. Definitions & Explanations (continued)
Reconciliations of Alternative Performance Measures
(continued)
2. (a) Reconciliation of Allowance for expected credit losses on
loans and advances to customers (ECL)
31 March 31 December
2022 2021
EUR000 EUR000
========== ============
Allowance for expected credit losses on loans
and advances to customers (ECL) as per the
underlying basis (as defined below) 734,060 791,830
========== ============
Reconciling items:
========== ============
Residual fair value adjustment on initial
recognition (Note 1 below) (99,459) (105,678)
========== ============
Aggregate fair value adjustment on loans
and advances to customers measured at fair
value through profit or loss (31,072) (53,700)
========== ============
Allowance for expected credit losses on loans
and advances to customers classified as held
for sale (Section F.6) (308,916) (305,419)
========== ============
Residual fair value adjustment on initial
recognition on loans and advances to customers
classified as held for sale (Note 1 below) (19,092) (19,090)
========== ============
Provisions for financial guarantees and commitments (21,675) (21,945)
---------- ------------
Allowance for ECL for impairment of loans
and advances to customers as per Section
F.3 253,846 285,998
========== ============
2. (b) Reconciliation of Allowance for expected credit losses on
loans and advances to customers classified as held for sale
(ECL)
31 March 31 December
2022 2021
EUR000 EUR000
========= ============
Allowance for expected credit losses on loans
and advances to customers (ECL) classified
as held for sale as per the underlying basis 328,008 324,509
========= ============
Reconciling items:
========= ============
Residual fair value adjustment on initial
recognition on loans and advances to customers
classified as held for sale (Note 1 below) (19,092) (19,090)
========= ============
Allowance for ECL for impairment of loans
and advances to customers classified as held
for sale as per Section F.6 308,916 305,419
========= ============
3. Reconciliation of NPEs
31 March 31 December
2022 2021
EUR000 EUR000
=========== ============
NPEs as per the underlying basis (as defined
below) 1,247,315 1,343,308
=========== ============
Reconciling items:
=========== ============
Loans and advances to customers (NPEs) classified
as held for sale (Note 2 below) (553,780) (553,619)
=========== ============
Residual fair value adjustment on initial
recognition on loans and advances to customers
(NPEs) classified as held for sale (Note
3 below) (19,029) (19,030)
=========== ============
Loans and advances to customers measured
at fair value through profit or loss (NPEs) (99,093) (122,972)
=========== ============
POCI (NPEs) (Note 4 below) (52,185) (70,814)
=========== ============
Residual fair value adjustment on initial
recognition on loans and advances to customers
(NPEs) classified as Stage 3 (Section F.5) (2,816) (3,530)
----------- ------------
Stage 3 gross loans and advances to customers
at amortised cost as per Section F.5 520,412 573,343
=========== ============
NPE ratio
=========== ============
NPEs (as per table above) (EUR000) 1,247,315 1,343,308
=========== ============
Gross loans and advances to customers (as
per table above) (EUR000) 10,964,417 10,856,660
=========== ============
Ratio of NPE/Gross loans (%) 11.4% 12.4%
=========== ============
H. Definitions & Explanations (continued)
Reconciliations of Alternative Performance Measures
(continued)
3. Reconciliation of NPEs (continued)
Note 1: Residual fair value adjustment
The residual fair value adjustment mainly relates to the loans
and advances to customers acquired as part of the acquisition of
certain operations of Laiki Bank in 2013. In accordance with the
provisions of IFRS 3, this adjustment decreased the gross balance
of loans and advances to customers. The residual fair value
adjustment is included within the gross balance of loans and
advances to customers as at each balance sheet date. However, for
credit risk monitoring, the residual fair value adjustment as at
each balance sheet date is presented separately from the gross
balance of loans and advances to customers .
Note 2 : G ross loans at amortised cost after residual fair
value adjustment on initial recognition classified as held for sale
include an amount of EUR474,404 thousand Stage 3 loans (31 December
2021: EUR474,459 thousand Stage 3 loans) and an amount of EUR79,376
thousand POCI - Stage 3 loans (out of a total of EUR79,449 thousand
POCI loans) (31 December 2021: EUR79,160 thousand POCI - Stage 3
loans (out of a total of EUR79,255 thousand POCI loans)), as
disclosed in Section F.5.
Note 3 : Residual fair value adjustment on initial recognition
of loans and advances to customers classified as held for sale
includes an amount of EUR2,218 thousand for Stage 3 loans (31
December 2021: EUR2,079 thousand for Stage 3 loans) and an amount
of EUR16,811 thousand POCI - Stage 3 loans (out of a total of
EUR16,812 thousand POCI loans) (31 December 2021: EUR16,951
thousand for POCI - Stage 3 loans (out of a total of EUR16,954
thousand POCI loans)), as disclosed in Section F.5.
Note 4 : Gross loans and advances to customers at amortised cost
before residual fair value adjustment on initial recognition
include an amount of EUR52,185 thousand POCI - Stage 3 loans (out
of a total of EUR140,911 thousand POCI loans) (31 December 2021:
EUR70,814 thousand POCI - Stage 3 loans (out of a total of
EUR159,755 thousand POCI loans)) as disclosed in Section F.5.
4. Reconciliation of Gross Loans - Pro forma
31 March 31 December
2022 2021
EUR000 EUR000
=========== ============
Gross loans and advances to customers (as
per table 1 (a) above) 10,964,417 10,856,660
=========== ============
Gross loans and advances to customers classified
as held for sale
(Project Helix 3 and Sinope) (as per table
1 (b) above) (575,843) (574,879)
=========== ============
Gross loans and advances to customers - pro
forma 10,388,575 10,281,781
=========== ============
5. Reconciliation of NPEs - Pro forma
31 March 31 December
2022 2021
EUR000 EUR000
========== ============
NPEs (as per table 3 above) 1,247,315 1,343,308
========== ============
Reconciling items:
========== ============
Gross loans and advances to customers (NPEs)
classified as held for sale (Project Helix
3 and Sinope) (Note 2 of table 3 above) (553,780) (553,619)
========== ============
Residual fair value adjustment on initial
recognition on loans and advances to customers
(NPEs) classified as held for sale (Project
Helix 3 and Sinope) (Note 3 of table 3 above) (19,029) (19,030)
========== ============
NPEs - pro forma 674,506 770,659
========== ============
NPE ratio - Pro forma 31 March 31 December
2022 2021
EUR000 EUR000
=========== ============
NPEs - Pro forma (as per table above) (EUR000) 674,506 770,659
=========== ============
Gross loans and advances to customers - Pro
forma (as per table above) (EUR000) 10,388,575 10,281,781
=========== ============
Ratio of NPE/Gross loans - Pro forma (%) 6.5% 7.5%
=========== ============
H. Definitions & Explanations (continued)
Ratios Information
1. Net Interest Margin
Three months ended
31 March
2022 2021
========== =========
1.1. Reconciliation of Net interest income EUR000 EUR000
========== =========
Net interest income as per the underlying basis/Unaudited
Interim Consolidated Income Statement 71,347 76,356
========== =========
Net interest income used in the calculation
of NIM (annualised) 289,352 309,666
========== =========
1.2. Interest earning assets 31 March 31 December
2022 2021
EUR000 EUR000
=========== ============
Cash and balances with central banks 9,329,711 9,230,883
=========== ============
Loans and advances to banks 312,967 291,632
=========== ============
Loans and advances to customers 10,004,197 9,836,405
=========== ============
Loans and advances to customers held for sale 247,836 250,370
=========== ============
Prepayments, accrued income and other assets
- Deferred consideration receivable ('DPP') 302,036 299,766
=========== ============
Investments
=========== ============
Debt securities 1,860,853 1,930,388
=========== ============
Less: Investments which are not interest bearing (5,790) (5,534)
----------- ------------
Total interest earning assets 22,051,810 21,833,910
=========== ============
1.3. Quarterly average interest earning assets
(EUR000)
=========== ============
* as at 31 March 2022 21,942,860
=========== ============
* as at 31 March 2021 18,978,032
=========== ============
1.2.
1.2.
1.4. Net interest margin Three months ended
31 March
2022 2021
=========== ===========
Net interest income (annualised) (as per table
1.1. above) (EUR000) 289,352 309,666
=========== ===========
Quarterly average interest earning assets (as
per table 1.3. above) (EUR000) 21,942,860 18,978,032
=========== ===========
NIM (%) 1.32% 1.63%
=========== ===========
H. Definitions & Explanations (continued)
Ratios Information (continued)
2. Operating profit return on average assets
The various components used in the determination of the
operating profit return on average assets are provided below:
31 March 31 December
2022 2021
EUR000 EUR000
=========== ============
Total assets used in the computation of the
operating profit return on average assets per
the Unaudited Interim Consolidated Balance
Sheet 25,117,310 24,962,697
=========== ============
31 March 31 March
2022 202 1
Annualised operating profit (EUR000) 203,802 181,875
=========== ===========
Quarterly average total assets (EUR000) 25,040,003 22,278,861
=========== ===========
Operating profit return on average assets (annualised)
(%) 0.8% 0.8%
=========== ===========
2. Return on tangible equity (ROTE) after tax and before non-recurring items
The various components used in the determination of 'Return on
tangible equity (ROTE) after tax and before non-recurring items'
are provided below:
31 March 31 March
2022 2021
Profit after tax and before non-recurring items
(attributable to the owners of the Company) per
the underlying basis (annualized) (EUR000) 112,201 67,914
========== ==========
Quarterly average tangible total equity (as per
table 3.2 below) (EUR000) 1,663,217 1,652,342
========== ==========
ROTE after tax and before non-recurring items
(annualised) (%) 6.7% 4.1%
========== ==========
3.1 Tangible total equity 31 March 31 December
2022 2021
EUR000 EUR000
========== ============
Equity attributable to the owners of the Company
(as per the statutory basis) 1,849,287 1,838,793
========== ============
Less: Intangible assets (as per the statutory
basis) (177,612) (184,034)
========== ============
Tangible total equity 1,671,675 1,654,759
========== ============
3.2 Quarterly average tangible total equity
(EUR000 )
========== ============
* as at 31 March 2022 1,663,217
========== ============
* as at 31 March 2021 1,652,342
========== ============
H. Definitions & Explanations (continued)
Advisory and Comprise mainly (a) fees of external advisors in
other restructuring relation to: (i) disposal of operations and non-core
costs assets, and (ii) customer loan restructuring activities,
and (b) the cost of the tender offer for the Old
T2 Capital Notes, where applicable.
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 (including residual fair
value adjustment on initial recognition on loans
and advances to customers classified as held for
sale), (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 the Capital Requirements Regulation (EU) No
575/2013, as amended by CRR II applicable as at the
reporting date.
Basic earnings/(losses) Basic earnings/(losses) after tax and before non-recurring
after tax and items per share (attributable to the owners of the
before non-recurring Company) is the Profit/(loss) after tax and before
items per share non-recurring items (as defined below) (attributable
(attributable to the owners of the Company) divided by the weighted
to the owners average number of shares in issue during the period,
of the Company) excluding treasury shares.
Carbon neutral The reduction and balancing (through a combination
of offsetting investments or emission credits) of
greenhouse gas emissions from own operations.
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.
Cost to Income Cost-to-income ratio comprises total expenses (as
ratio defined) divided by total income (as defined).
Data from the The latest data from the Statistical Service of the
Statistical Republic of Cyprus, Cyprus Statistical Service, was
Service published on 17 May 2022.
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
H. Definitions & Explanations (continued)
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 EUR149 mn at 31 March 2022 (compared to EUR178
mn at 31 December 2021).
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 EUR312 mn at 31 March 2022
(compared to EUR336 mn at 31 December 2021).
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.
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. Tangible
total equity comprises of equity attributable to
the owners of the Company minus intangible assets.
Leverage Ratio Leverage Ratio Exposure (LRE) is defined in accordance
Exposure (LRE) with the Capital Requirements Regulation (EU) No
575/2013, as amended.
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 March 2022, compared to 38.8% at 31 December
2021. The increase in 1Q is mainly due to a reduction
in loans in the banking system.
MSCI ESG Rating The use by the Company and 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 Company
or 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.
H. Definitions & Explanations (continued)
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). The regulatory limit, enforced
in June 2021, has been set at 100% as per the CRR
II.
Net zero emissions The reduction of greenhouse gas emissions to net
zero through a combination of reduction activities
and offsetting investments
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.
Non-interest Non-interest income comprises Net fee and commission
income income, Net foreign exchange gains/(losses) and net
gains/(losses) 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 As per the European Banking Authorities (EBA) standards
exposures (NPEs) and European Central Bank's (ECB) Guidance to Banks
on Non-Performing Loans (which was published in March
2017), non-performing exposures (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 Capital Requirement Regulation (CRR),
which would also trigger a default under specific
credit adjustment, diminished financial obligation
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 previously classified
as NPEs that present more than 30 days past due within
the probation period.
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).
The Days- Past -Due (DPD) counter begins counting
DPD as soon as the arrears or excesses of an exposure
reach the materiality threshold (rather than as of
the first day of presenting any amount of arrears
or 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.
For retail debtors, 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.
For non--retail debtors, when an exposure fulfils
the NPE criteria set out above, then the total customer
exposure is classified as non--performing.
Material arrears/excesses are defined as follows:
(a) Retail exposures: Total arrears/excess amount
greater than EUR100, (b) Exposures other than retail:
Total arrears/excess amount greater than EUR500 and
the amount in arrears/excess in relation to the customer's
total exposure is at least 1%.
For further information please refer to the Annual
Financial Report 2021.
H. Definitions & Explanations (continued)
Non-recurring Non-recurring items as presented in the 'Unaudited
items Interim Condensed Consolidated Income Statement -
Underlying basis' relate to the following items,
as applicable: (i) Advisory and other restructuring
costs - organic, (ii) Provisions/net loss relating
to NPE sales, (iii) Restructuring and other costs
relating to NPE sales, and (iv) Restructuring costs
relating to the Voluntary Staff Exit Plan.
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).
NPE sales NPE sales refer to sales of NPE portfolios completed,
as well as contemplated and potential future sale
transactions, irrespective of whether or not they
met the held for sale classification criteria at
the reporting dates.
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)
Pro forma for References to pro forma figures and ratios as at
HFS (held for 31 March 2022 (and 31 December 2021) refer to Project
sale) Helix 3 and Project Sinope. They are based on 31
March 2022 (and 31 December 2021) underlying basis
figures and assume their completion, currently expected
to occur in 2H2022 and 2Q2022 respectively, which
remain subject to customary regulatory and other
approvals. References to pro forma figures and ratios
as at 31 March 2021 (and 31 December 2020) refer
to Project Helix 2, which was completed in June 2021.
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.
Project Helix Project Helix 2 refers to the sale of portfolios
2 of loans with a total gross book value of EUR1.3
bn completed in June 2021. For further information
please refer to section A.1.5 'Loan portfolio quality'.
Project Helix Project Helix 3 refers to the agreement the Group
3 reached in November 2021 for the sale of a portfolio
of NPEs with gross book value of EUR568 mn, as well
as real estate properties with book value of c.EUR120
mn as at 30 September 2021. For further information
please refer to section A.1.5 Loan portfolio quality.
Project Sinope Project Sinope refers to the agreement the Group
reached in December 2021 for the sale of a portfolio
of NPEs with gross book value of EUR12 mn as at 31
December 2021, as well as properties in Romania with
carrying value EUR0.6 mn as at 31 December 2021.
For further information please refer to section A.1.5
'Loan portfolio quality'.
H. Definitions & Explanations (continued)
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
(including cash and balances with central banks classified
as non-current assets held for sale), 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 'deferred consideration receivable' included
within 'other assets', plus investments (excluding
equities and mutual funds).
Qoq Quarter on quarter change
Special levy Relates to the special levy on deposits of credit
on deposits institutions in Cyprus, contributions to the Single
and other levies/contributions Resolution Fund (SRF), contributions to the Deposit
Guarantee Fund (DGF), as well as the DTC levy, where
applicable.
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 on deposits and other
levies/contributions . It does not include (i) 'advisory
and other restructuring costs-organic', (ii) restructuring
costs relating to NPE sales, or (iii) restructuring
costs relating to the Voluntary Staff Exit Plan.
(i) 'Advisory and other restructuring costs-organic'
amounted to EUR1 mn for 1Q2022 (compared to EUR3
mn for 4Q2021 and EUR3 mn for 1Q2021), (ii) Restructuring
costs relating to NPE sales for 1Q2022 amounted to
EUR1 mn (compared to EUR0.2 mn for 4Q2021 and EUR4
mn for 1Q2021), and (iii) Restructuring costs relating
to the Voluntary Staff Exit Plan (VEP) for 1Q2022
amounted to EUR3 mn (compared to EUR16 mn for 4Q2021).
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)/ net reversals 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 quarter ended 31 March 2022.
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 quarter 31 March 2022.
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 2021,
upon which the auditors have given an unqualified report, were
published on 30 March 2022 and are expected to be delivered to the
Registrar of Companies of Ireland within 56 days of 30 September
2022. The Board of Directors approved the Group statutory financial
statements for the quarter ended 31 March 2022 on 18 May 2022.
Statutory basis: S tatutory information is set out on pages
33-37. 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 quarter ended 31 March 2022, 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
page 38) to allow a comparison of the Group's underlying financial
position and performance, as set out on pages 4-6.
The financial information included in this announcement is
neither reviewed nor audited by the Group's external auditors.
This announcement and the presentation for the Group Financial
Results for the quarter ended 31 March 2022 have been posted on the
Group's website www.bankofcyprus.com (Group/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 H, together with explanations.
The Group Financial Results for the quarter ended 31 March 2022
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. The
Russian invasion of Ukraine has led to heightened volatility across
global markets and to the coordinated implementation of sanctions
on Russia, Russian entities and nationals. The Russian invasion of
Ukraine has already caused significant population displacement, and
as the conflict continues, the disruption will likely increase. The
scale of the conflict and the speed and extent of sanctions, as
well as the uncertainty as to how the situation will develop, may
have significant adverse effects to the market and macroeconomic
conditions, including in ways that cannot be anticipated. This
creates significantly greater uncertainty about
forward-looking statements. 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. At 31 March 2022, the
Bank of Cyprus Group operated through a total of 86 branches in
Cyprus, of which 11 operated as cash offices. Bank of Cyprus also
has representative offices in Russia, Ukraine and China. At 31
March 2022, the Group's Total Assets amounted to EUR25.1 bn and
Total Equity was EUR2.1 bn. The Bank of Cyprus Group employed 3,395
staff worldwide. 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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